[Letterhead of CapMac Holdings Inc.]
April 7, 1997
Dear Stockholder:
We are pleased to invite you to attend the Annual Stockholders Meeting
of CapMAC Holdings Inc., which will be held on Wednesday, May 7, 1997 at 9:00
a.m. at the Business Conference Center at 780 Third Avenue, New York, New York.
The accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement contain the matters to be considered and acted upon. You are urged to
read these materials carefully.
In addition to the specific matters to be acted upon, there will be a
brief report on the operations of the Company and its strategy as well as an
opportunity for stockholders to ask the senior management of the Company
questions of general interest.
We hope that you will be able to attend the meeting, but if you cannot
do so, it is important that your shares be represented. Accordingly, we urge you
to mark, sign, date and return the enclosed proxy in the envelope provided. You
may, of course, withdraw your proxy if you attend the meeting and choose to vote
in person.
Very truly yours,
/s/ John B. Caouette
-----------------------------------
John B. Caouette
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
CapMAC Holdings Inc.
Notice of Annual Meeting of Stockholders
Wednesday, May 7, 1997 9:00 a.m.
To the Stockholders of CapMAC Holdings Inc.:
The Annual Meeting of Stockholders (the "Annual Meeting") of CapMAC
Holdings Inc. (the "Company") will be held on Wednesday, May 7, 1997 at 9:00
a.m. at the Business Conference Center at 780 Third Avenue, New York, New York
for the purpose of considering and voting upon:
1. The election of five directors for three year terms;
2. The ratification of the selection of KPMG Peat Marwick LLP as
independent auditors for the Company for 1997;
3. The approval of certain amendments to the CapMAC Holdings Inc.
1995 Omnibus Stock Incentive Plan, including an amendment to increase
the number of shares of Common Stock, par value $.01 per share,
reserved for grants thereunder; and
4. The transaction of such other business as may properly be
brought before the Annual Meeting or any adjournment thereof.
The record date for determining stockholders entitled to notice of,
and to vote at, the Annual Meeting is the close of business on March 12, 1997.
By Order of the Board of Directors,
/s/ Ram D. Wertheim
-------------------------------
Ram D. Wertheim
Secretary
885 Third Avenue
New York, New York 10022
April 7, 1997
<PAGE>
CapMAC Holdings Inc.
Proxy Statement
Annual Meeting of Stockholders
May 7, 1997
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") of CapMAC Holdings Inc. (the "Company"
or "Holdings") of proxies for the Annual Meeting of Stockholders to be held on
Wednesday, May 7, 1997, and any adjournment thereof (the "1997 Annual Meeting").
This Proxy Statement, the attached Notice of Annual Meeting and the accompanying
proxy card are first being sent to stockholders on or about April 7, 1997.
Only stockholders of record at the close of business on March 12, 1997
(the "Record Date") are entitled to receive notice of and to vote at the 1997
Annual Meeting. As of the Record Date, the Company had outstanding 16,534,560
shares of common stock, par value $0.01 per share (the "Common Stock"). Each
share of Common Stock is entitled to one vote.
The presence, in person or by proxy, of a majority of the aggregate
number of shares of Common Stock outstanding and entitled to vote is necessary
to constitute a quorum at the 1997 Annual Meeting. Abstentions and broker
non-votes will be counted only for purposes of determining whether a quorum is
present for the transaction of business at the 1997 Annual Meeting.
The shares represented by all valid proxies received will be voted as
specified on the proxies. Where specific choices are not indicated, the shares
represented by such proxies will be voted as recommended by the Board as
follows: (1) For the election of all nominees for director, (2) For ratification
of the selection of independent auditors for 1997, and (3) For approval of
amendments to the Company's 1995 Omnibus Stock Incentive Plan, including the
reservation of additional shares of stock for grants of stock option awards
thereunder.
Proxies are revocable at any time prior to exercise by written notice
to the Secretary of the Company, by execution and delivery of a subsequently
dated proxy or upon request if the stockholder is present at the 1997 Annual
Meeting and chooses to vote in person. However, the mere presence of a
stockholder at the annual meeting will not constitute the revocation of a
previously given proxy. In addition, stockholders whose shares of Common Stock
are not registered in their own name will need additional documentation from the
record holder of such shares to vote personally at the 1997 Annual Meeting.
Management of the Company knows of no matters other than the matters
described herein to be brought before the 1997 Annual Meeting. If any other
business should properly come before the 1997 Annual Meeting, the persons named
in the proxy will vote in accordance with their best judgment.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
As of the date hereof, the Board consists of 18 persons. However, it is
anticipated that Stephen L. Green, Charles P. Durkin and James H. Laird will
each resign at or prior to the 1997 Annual Meeting, and that the Board size will
be reduced to 15 persons. Each of the these directors has held a seat on the
board
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since 1992 in connection with investments in the Company by the venture capital
funds with which they have been affiliated, and as each fund has reduced its
investment in the Company since the Company's initial public offering in
December, 1995 (the "IPO"), these individuals have decided not to continue to
serve as directors. The Board gratefully acknowledges and thanks each of them
for their contributions to the Company.
The Certificate of Incorporation of the Company requires that the Board
be divided into three substantially equal classes, with each class serving
staggered terms of three years. Because the resignation of Messrs. Durkin and
Laird would cause there to be only four directors serving terms expiring in 1998
while there would be six directors serving terms expiring in 1999, Mr. Caouette,
currently serving a term expiring in 1999, will resign from his current position
on the Board prior to the 1997 Annual Meeting and is expected to be reappointed
by the Board to fill one of the vacancies for a term expiring in 1998. After
giving effect to each of the resignations described above, the appointment of
Mr. Caouette to a term expiring in 1998, and the election of new directors at
the 1997 Annual Meeting, there will be three classes of five directors each,
with terms expiring at the annual meetings held in 1998, 1999 and 2000,
respectively.
Directors are elected by the affirmative vote of the holders
of a majority of the aggregate number of shares of Common Stock outstanding,
present in person or represented by proxy, and entitled to vote thereon at the
1997 Annual Meeting when a quorum is present. Each of the nominees for director
is presently a director of the Company. Each has consented to being named a
nominee in this Proxy Statement and has agreed to serve as director if elected
at the 1997 Annual Meeting. In the event that any nominee is unable to serve,
the persons named in the proxy have discretion to vote for other persons if such
other persons are designated by the Board. The Board has no reason to believe
that any of the nominees will be unavailable for election.
Set forth below for each of the nominees being presented for
consideration by the stockholders and each incumbent director continuing in
office after the 1997 Annual Meeting are their names, the year they were
appointed a director of the Company and, if applicable, the year they were
appointed a director of the Company's insurance subsidiary, Capital Markets
Assurance Corporation ("CapMAC"), their principal occupations over the last five
years, their current positions with the Company and certain other directorships
held by them. In anticipation of the resignation of Mr. Caouette from his
current seat on the board and his reappointment to a term expiring in 1998, his
biographical information has been included under "Directors Continuing in Office
until 1998." The number of shares of the Company's stock beneficially owned by
each current director and each nominee is set forth under "Ownership of the
Company" below.
The Board recommends a vote FOR the election of all nominees for
director.
Nominees for Director
Nominees for Directors for Three Year Terms Expiring in 2000
George M. Jenkins Mr. Jenkins has served as a director of Holdings and
Age 45 CapMAC since June 1992. Mr. Jenkins is a General
Partner of Patricof & Co. managed funds and is a Vice
President of Patricof & Co., Ventures, Inc., which
provides management services for private equity
investment partnerships. He joined this venture capital
firm in 1987.
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Robert Model Mr. Model has served as a director of Holdings and
Age 54 CapMAC since June 1992. Mr. Model is a private investor
with interests in a number of partnerships and
businesses. Mr. Model is also the founder and President
of Mooncrest Ranch and Rocking M Ranch, diversified
agricultural operations located in Wyoming. Messrs.
Elliman and Model are first cousins.
Doren W. Russler Mr. Russler has served as a director of Holdings since
Age 68 December 1995 and of CapMAC since June 1992. Mr.
Russler is the retired Senior Vice President, Finance
and Administration, and Chief Financial Officer of NCR
Corporation. Mr. Russler serves as a trustee for the
AAL Mutual Funds, as a director of the AAL Variable
Product Series Fund, Inc., and as a member of the
advisory boards of Saratoga Partners II, L.P. and
Saratoga Partners III, L.P.
John T. Shea Mr. Shea has served as a director of Holdings and
Age 47 CapMAC since 1992. Mr. Shea is responsible for merchant
banking and direct equity investments at Saif Advisors,
Inc. which he joined in 1991.
Richard C. Yancey Mr. Yancey has served as a director of Holdings since
Age 70 July 1993 and as a director of CapMAC since October
1996. From 1952 to 1992, Mr. Yancey held a variety of
positions with Dillon, Read & Co. Inc. ("Dillon Read"),
including Vice President, Managing Director, Director
and Senior Advisor. Mr.Yancey serves on the Board of
Directors of The Score Board, Inc. and Composite Funds
Group.
Directors Continuing in Office until 1998
John B. Caouette Mr. Caouette is Chairman of the Boards of Directors and
Age 52 President and Chief Executive Officer of Holdings and
CapMAC. He has been President and Chief Executive
Officer since the Company and CapMAC were established
in 1987. He has been a director of CapMAC since 1987
and of Holdings since 1991. He was named Chairman of
CapMAC and Holdings in 1992. From 1982 to 1986, Mr.
Caouette was Senior Vice President and General Manager
of the Foreign Exchange and Money Market Division of
the Continental Grain Company. From 1970 through 1982,
Mr. Caouette held a variety of positions at Citicorp,
including Vice President and General Manager in the
Swaps and Eurosecurities Department from 1979 to 1982
and Executive Director of the Asia Pacific Capital
Corporation (a joint venture of Citibank and Fuji Bank)
in Hong Kong from 1974 through 1979.
Todd G. Cole Mr. Cole has served as a director of Holdings and
Age 76 CapMAC since June 1992. He is the retired Chairman of
CIT Financial Corporation. Mr. Cole served as Managing
Director of Simat, Helliesen & Eichner, Inc., an
international aviation consulting firm, from 1992 to
1996. Mr.Cole currently serves as a director of Delta
Life Corporation, Kaiser Ventures, Inc., DR Structured
Finance Corp., Hawaiian Airlines, Inc., Arrow Air,
Inc., and NAC Re Corporation.
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David D. Elliman Mr. Elliman has served as a director of Holdings since
Age 46 July 1995. Mr. Elliman is a founding principal of the
Elmrock Group of companies which include Elmrock
Capital Inc., Elmrock Partners and Stillrock
Management, Inc., a registered investment advisor. Mr.
Elliman is the Chief Investment Officer of the Elmrock
Group and is responsible for the asset portfolios of
the constituent companies. In addition, Mr. Elliman
serves as a director of Applied Signal Technology, Inc.
Messrs. Elliman and Model are first cousins.
Leif H. Olsen Mr. Olsen has served as a director of Holdings since
Age 71 December 1995 and of CapMAC since May 1994. Mr. Olsen
is President of Leif H. Olsen Investments, Inc., an
economic consulting and investment management firm in
New Canaan, Connecticut. He is a director of the
Interpublic Group of Companies, Incorporated, a trustee
of the Atlantic Mutual Insurance Company and a director
of Lafayette American Bank.
Homer McK. Rees Mr. Rees has served as a director of Holdings since
Age 66 December 1995 and of CapMAC since January 1993. Mr.
Rees is the retired Chairman and Chief Executive
Officer of Prudential Capital Corporation, an
investment subsidiary of The Prudential Insurance
Company of America. Mr. Rees is a director of Meridian
Point Realty Trust VIII, a publicly-held REIT
headquartered in San Francisco.
Directors Continuing in Office Until 1999
Bryan A. Bowers Mr. Bowers has served as a director of Holdings since
Age 44 April 1996. He was elected a director of CapMAC in
October, 1996. Mr. Bowers is currently a Managing
Director with Centre Trading Holdings Limited, a wholly
owned indirect subsidiary of The Zurich Insurance
Company. From 1990 to 1994, Mr. Bowers was
self-employed and from 1988 to 1990, he was a Vice
President with PaineWebber Inc. Mr. Bowers was
nominated for election to the Board in accordance with
the terms of the Subscription Agreement between the
Company and Centre Reinsurance Limited. See "Certain
Relationships and Related Transactions."
Michael J. Horgan Mr. Horgan has served as a director of Holdings since
Age 66 December 1995 and of CapMAC since July 1993. Mr. Horgan
retired from Citibank in 1997, where he had been
employed since 1954 and was Chairman of the Credit
Policy Committee of Citicorp and Citibank, N.A.
Dr. Rosita Leong, M.D. Dr. Leong has served as a director of Holdings and
Age 56 CapMAC since June 1992. Dr. Leong graduated with a
degree in medicine from the University of Santo Tomas
in 1963. She specialized in pathology and later became
Chief of Pathology at the Metropolitan Hospital in
Manila until 1973. Since 1973, Dr. Leong has been a
private investor.
4
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Arthur S. Penn Mr. Penn has served as a director of Holdings since
Age 61 July 1993 and CapMAC since March 1995. Mr. Penn is
President of Elmrock Capital Inc. and a General Partner
of Elmrock Partners, which are part of the Elmrock
Group, providing equity capital for leveraged asset
purchases. He is President and one of the founders of
Stillrock Management, Inc., a registered investment
advisor.
Akira Seko Mr. Seko has served as a director of Holdings and
Age 52 CapMAC since April 1996, when he was appointed by the
Board to fill the position vacated by the resignation
of Koichiro Muta. Mr. Seko was appointed Chief
Executive Officer and President of ORIX USA Corporation
(equipment leasing, asset based lending and general
corporate financing) in April 1996. From 1994 to April
1996, Mr. Seko was President and Chief Executive
Officer of ORIX Real Estate Equities, Inc., based in
Chicago, and from 1991 to 1994 he was General Manager
of the Overseas Credit Department of ORIX Corporation.
From 1970 to 1991, Mr. Seko served in various
capacities for ORIX Corporation and various of its
subsidiaries. The ORIX Corporation is a Japanese
leasing company. Mr. Seko's nomination for election as
a director was designated by ORIX USA Corporation under
the terms of the Subscription Agreement between
Holdings and ORIX USA Corporation. See "Certain
Relationships and Related Transactions."
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Only directors of the Company who are neither employees of the Company
nor are currently affiliated with an entity which either had or has the power to
designate a director pursuant to the terms of a Stockholders' Agreement (the
"Stockholders' Agreement), to which all Stockholders prior to the the IPO were a
party, receive compensation for their services as director. These directors
(Messrs. Cole, Horgan, Rees, Russler, Olsen and Yancey) each receive $10,000 per
year and $500 per Board meeting attended. Each also receives $4,000 per year for
service on each committee of the Board on which such director serves. All
directors are entitled to reimbursement of reasonable out-of-pocket expenses
incurred in connection with Board and Board committee meetings.
During the year ended December 31, 1996, the Board had five regularly
scheduled meetings and no special meetings. All directors, with the exception of
Mr. Horgan, attended at least 75% of the meetings of the Board and the
committees of which they were members.
Committees
The Audit Committee is composed entirely of directors who are not
employees of the Company or any of its subsidiaries. The Audit Committee makes
recommendations to the Board regarding the independent auditors to be nominated
for election by the shareholders, reviews the independence of such auditors,
approves the scope and results of the annual audit activities, reviews the
adequacy of internal accounting and auditing procedures and directs and
supervises any special audit inquiries. The current
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members of the Audit Committee are Messrs. Russler (Chairman), Horgan and
Jenkins. Mr. Horgan replaced Mr. Laird, who resigned from the audit committee
effective October 23, 1996. The Audit Committee met five times in 1996.
The Compensation Committee reviews and approves the compensation and
employee benefit programs of the Company and its subsidiaries, including the
terms and conditions (including price and vesting) of awards under the stock
option plans of the Company and the payment of annual bonuses. The current
members of the compensation committee are Messrs. Jenkins, Laird (Chairman),
Horgan, Green and Russler. Mr. Laird will no longer be the Chairman of the
Compensation Committee effective the date on which his resignation from the
Board, which is anticipated, becomes effective. No replacement has yet been
designated. There were two meetings of the Compensation Committee in 1996.
The Executive Committee consists of Messrs. Caouette (Chairman), Cole,
Laird and Penn. The Executive Committee has the power to exercise all authority
of the Board of Directors in the management and affairs of Holdings when the
Board is not in session, subject to certain restrictions. Mr. Laird will no
longer be a member of Executive Committee effective the date on which his
resignation from the Board, which is anticipated, becomes effective. The Board
may, but is not obligated to, appoint a successor. There were no meetings of the
Executive Committee in 1996.
Effective April 17, 1996, the Board established the New Business
Committee for the purpose of reviewing and, if appropriate, approving new
business ventures of the Company which require equity investments above a
threshold amount to be determined from time to time by the Board. The members of
the New Business Committee currently consist of Messrs. Caouette (Chairman),
Elliman, Green, Horgan, and Jenkins. Mr. Green will no longer be a member of the
New Business Committee as of the date on which his resignation from the Board,
which is expected, becomes effective. The New Business Committee met three times
in 1996.
At the Board meeting held on January 29, 1997, a Governance Committee
was established to establish criteria for the membership on the Board, make
recommendations with respect to the appropriate size of the Board, review the
performance of the Board and of individual directors, and to consider, nominate
and recommend to stockholders of the Company particular directors for membership
on the Board. The members of the Governance Committee currently are Messrs.
Caouette, Cole and Laird. Mr. Laird will no longer be a member upon his
resignation from the Board.
A stockholder may nominate a person for election as a director by
complying with Section 2.7 of the Company's By-laws, which provides that advance
notice of the nomination must be delivered to the Company, which notice must
contain the name and certain information concerning the nominee and the
stockholders who support the nominee's election. A copy of such By-law provision
may be obtained upon written request directed to the Secretary of the Company.
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OWNERSHIP OF THE COMPANY
The following table shows the number of shares of Common Stock and the
percent of outstanding Common Stock beneficially owned as of March 1, 1997,
within the meaning of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), on a fully diluted basis (assuming that all warrants and
options for Common Stock outstanding are exchanged for an equal number of shares
of Common Stock), by current directors, nominees for director, executive
officers named in the Summary Compensation Table, officers and directors
considered as a group, and to the extent known by the Company, holders of 5% or
more of the Common Stock. For purposes of this table, a person or group of
persons is deemed to have "beneficial ownership" of any shares as of a given
date which such person has the right to acquire within 60 days after such date,
but such shares are not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person. Shares beneficially owned by
executive officers include shares of Common Stock and restricted stock owned
directly or through trusts, shares allocated under the Employee Stock Ownership
Plan ("ESOP") and all outstanding options which are currently exercisable or are
exercisable within 60 days. For 5% shareholders and directors, shares owned
beneficially include both shares owned directly and shares which may be obtained
upon the exercise of certain warrants (the "Warrants").
Shares of Common Stock
Beneficially Owned
------------------
5% Shareholders, Directors, Named Executive Officers Percent
and Directors and Executive Officers as a Group Number of Class
----------------------------------------------- ------ --------
Dillon, Read & Co., Inc (1)
535 Madison Avenue
New York, NY 10022 ..................................... 1,995,186 9.94%
Saratoga Partners II, L.P. (2)
535 Madison Avenue
New York, NY 10022 ..................................... 1,673,442 8.34%
Allstate Insurance Company (3)
c/o Development Division
Allstate Plaza South 65D
Northbrook, IL 60062 ................................... 920,679 4.59%
A I M Management Group Inc. (4)
11 Greenway Plaza
Houston, TX 77046 ..................................... 1,343,100 6.69%
John B. Caouette (5) .................................... 376,166.67 1.87%
C. Thomas Meyers (5) .................................... 132,634.27 *
Maryam H. Muessel (5) ................................... 51,494.38 *
Paul V. Palmer (5) ...................................... 292,660.87 1.46%
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Ruth M. Whaley (5) ...................................... 28,139.98 *
Bryan A. Bowers (6) ..................................... 500,000 2.49%
Todd G. Cole ............................................ 2,000 *
Charles P. Durkin, Jr. (7) .............................. 13,812 *
David D. Elliman (8) .................................... 212,990 *
Stephen L. Green ........................................ -- --
Michael J. Horgan ....................................... -- --
George Merritt Jenkins (9) .............................. 6,207 *
James H. Laird (10) ..................................... 2,763 *
Dr. Rosita Leong, M.D ................................... -- --
Robert Model (11) ....................................... 239,969 1.20%
Akira Seko (12) ......................................... 500,001 2.49%
Leif Olsen .............................................. -- --
Arthur S. Penn (13) ..................................... 208,576 1.04%
Homer McK. Rees ......................................... 1,263 *
Doren W. Russler ........................................ -- --
John T. Shea (14) ....................................... 391,826 1.95%
Richard Yancey .......................................... 1,460.5 *
Directors and Executive Officers
as a group (29 persons) ............................... 3,393,866.93 16.92%
- - ----------
* Less than one percent
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(1) The number of shares owned is based on the Form 4 report for February,
1997 filed by Dillon, Read & Co. Inc. with the Securities and Exchange
Commission (the "SEC"). Such number includes the shares held by Saratoga
Partners II, L.P., shares held by certain other investment partnerships
managed by Dillon Read and shares held by individuals for whom Dillon
Read serves as attorney-in fact, including Messrs. Durkin, Laird and
Yancey. Such number also includes 760,542 shares that would be received
upon exercise of Warrants.
(2) The number of shares owned is based on the Form 4 report for February,
1997 filed on behalf of Saratoga Partners II, L.P. with the SEC and
includes 638,973 shares that would be received upon exercise of Warrants.
(3) The number of shares owned is based upon information set forth in the
Schedule 13G report of A I M Management Group Inc. filed with the SEC
with respect to its beneficial ownership as of December 31, 1996. Such
Schedule 13G report states that A I M Management Group Inc. has shared
voting power and shared dispositive power with respect to all of the
shares owned by it.
(4) The number of shares owned is based upon information set forth in the
Schedule 13G report of The Allstate Corporation filed with the SEC with
respect to its beneficial ownership as of December 31, 1996. Such
Schedule 13G report states that Allstate Insurance Company has sole
voting and sole dispositive power with respect to all of the shares owned
by it. Includes 170,679 shares that would be received upon exercise of
Warrants.
(5) The number of shares for each executive officer includes (i) the number
of shares of Common Stock owned directly by such executive officers; (ii)
the following shares of restricted stock which were granted to such
executive officers upon the consummation of the IPO in exchange for such
officers agreeing to convert restricted stock units previously held by
such officers into cash and defer the receipt of cash due from such
conversion: John B. Caouette--37,807, C. Thomas Meyers--21,045, Paul V.
Palmer--13,800, Maryam H. Muessel--0 and Ruth M. Whaley--0; and (iii) the
following shares which may be acquired upon the exercise of stock options
which were exercisable as of March 1, 1997: John B. Caouette--312,069.5,
Paul V. Palmer--251,759, C. Thomas Meyers--96,283.5, Maryam H.
Muessel--43,717.5, and Ruth M. Whaley--22,842.5. The number of shares
also includes the number of shares of Common Stock owned indirectly by
such executive officers through the Company's ESOP through December 31,
1996.
(6) Consists of 500,000 shares owned by Centre Reinsurance Limited. By virtue
of Mr. Bowers' position as a Managing Director of Centre Trading Holdings
Limited, he may be deemed to share voting and investment power with
respect to such shares.
(7) Excludes shares held by entities for which Dillon Read or affiliated
entities serve as investment manager and shares held by individuals for
whom Dillon Read serves as attorney-in-fact. Mr. Durkin is a Managing
Director of Dillon Read. Includes 2,562 shares that would be received
upon exercise of Warrants.
(8) Includes 155,992 shares held by the R.J. Mod Limited Partnership, of
which Mr. Elliman is a general partner; and 26,998 shares held by the
Faith Rockefeller Model Trust, for which Mr. Elliman is co-trustee. Mr.
Elliman may be deemed to share voting and investment power with respect
to such shares.
(9) Consists of 2,608 shares held by CIN Ventures Nominee Ltd., a U.K.
company which is managed by Patricof & Co. Ventures, Inc., of which Mr.
Jenkins is a Vice President, and 3,599 shares which are held in trust for
the benefit of the children of Mr. Jenkins.
(10) Includes 513 shares that would be received upon exercise of Warrants.
(11) Includes 155,992 shares held by R.J. Mod Limited Partnership, of which
Mr. Model is a General Partner; and 26,998 shares held by the Faith
Rockefeller Model Trust, for which Mr. Model is co-trustee. By virtue of
these positions, Mr. Model may be deemed to share voting and investment
power with respect to such shares.
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(12) Consists of shares held by ORIX USA Corporation, of which Mr. Seko serves
as President, Chief Executive Officer and as a director. By virtue of
these positions, Mr. Seko may be deemed to share voting and investment
power with respect to such shares. Mr. Seko disclaims beneficial
ownership.
(13) Includes 155,992 shares held by R.J. Mod Limited Partnership, of which
Mr. Penn is a General Partner and 9,978 shares held by the Arthur &
Marilyn Penn Trust, for which Mr. Penn is a trustee. Mr. Penn may be
deemed to share voting and investment power with respect to such shares.
(14) Includes 427.5 shares and 170,788.5 shares that would be received upon
exercise of Warrants held by Mr. Shea and MSW Limited, respectively, 908
shares held by Mr. Shea and 219,702 shares held by MSW Limited. Mr. Shea
may be deemed to share voting and investment power with respect to shares
beneficially owned by MSW Limited.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the surviving provisions of the Stockholders' Agreement,
the holders of shares of Common Stock issued before consummation of the IPO, and
Centre Reinsurance Limited ("Centre Re") are entitled to certain rights with
respect to the registration of such shares under the Securities Act. The
Stockholders' Agreement provides that if the Company proposes to register its
Common Stock under the Securities Act of 1933, as amended (the "Securities
Act"), other than a registration statement on Form S-8 or any similar form, such
stockholders have the "piggy-back" right to request the Company to include in
such registration statement shares of Common Stock (including Common Stock
issued upon conversion or exercise of warrants or options) held by such
stockholders or permitted transferees.
The Stockholders' Agreement also provides that in the event any
stockholder (the "Proposed Transferor") subject to the Stockholders' Agreement
proposes to transfer (other than transfers to affiliates or through a registered
public offering or under Rule 144 under the Securities Act) shares of Common
Stock constituting more than five percent of the outstanding shares of Common
Stock of the Company to a person (the "Proposed Purchaser"), each other
stockholder subject to the Stockholders' Agreement has the right to require such
Proposed Purchaser to purchase a specified number of shares from such
stockholder with a corresponding reduction in the number of shares to be
purchased from the Proposed Transferor. These rights shall terminate on December
19, 1998 (three years after the closing date of the IPO).
Dillon Read & Co. Inc. ("Dillon Read") was a managing underwriter in
the secondary stock offering of the Company's Common Stock by certain
shareholders in July, 1996. All of the proceeds of the secondary offering (net
of the underwriting discounts and commissions) were received by the selling
shareholders. The Company did not pay any of the underwriting fees and
commissions but did pay certain legal expenses of the selling shareholders
incurred in connection with the offering.
Mr. Durkin is an officer of Dillon Read and Messrs. Laird and Yancey
are former officers of Dillon Read.
Contemporaneously with the closing of the IPO, the Company sold 500,000
unregistered shares of Common Stock to Centre Re, a wholly owned indirect
subsidiary of The Zurich Insurance Company. Centre Re is a Bermuda based
reinsurance company, which, together with its affiliates, provides finite risk
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reinsurance products, insurance and reinsurance derivative products, traditional
reinsurance products, and other insurance and financial services. Pursuant to
its agreement with the Company, for so long as Centre Re maintains a certain
level of investment in the Company, Centre Re has the right to designate one
nominee to the Board. Mr. Bowers is the nominee of Centre Re.
In July 1995, ORIX USA Corporation ("ORIX") acquired 500,001 shares of
Common Stock of the Company. ORIX is a subsidiary of the ORIX Corporation, a
Japanese leasing company with consolidated assets in 1995 in excess of $49
billion. Pursuant to its agreement with the Company, for so long as ORIX
maintains a certain level of investment in the Company, ORIX has the right to
designate one nominee to the Board and to the board of directors of CapMAC. Mr.
Seko is the nominee of ORIX. The agreement also provides, at the request of
ORIX, for the training in the monoline financial guarantee business by CapMAC of
up to two ORIX employees at any given time until the year 2005 (subject to
extension as agreed upon by Holdings).
In connection with ORIX's subscription for shares of Common Stock of
Holdings, an affiliate of ORIX was granted the right to purchase, for an
aggregate sum of $10,000,000, a sufficient amount of shares or other ownership
interests in the Company's affiliate, CapMAC Asia Ltd. ("CapMAC Asia") to
provide such affiliate with at least 20% economic interest in CapMAC Asia. Such
affiliate of ORIX has purchased preference shares of CapMAC Asia for an
aggregate price of $6.8 million and has committed to subscribe for additional
preference shares of CapMAC Asia, at an aggregate price of $3.2 million, which
collectively represents 20% of the total aggregate capitalization of CapMAC
Asia.
The Company, through its subsidiary CapMAC Financial Services, Inc.
("CFS"), has adopted an Executive Loan Program (the "Loan Program") pursuant to
which officers of the Company who hold Company stock or options are eligible to
borrow from the Company one or more loans (each a "Loan"). The purpose of the
Loan Program is to provide liquidity for the special needs of senior officers
and alleviate the need to sell Company stock or exercise stock options held by
such senior officers. Loans outstanding to any one person may not exceed
$250,000, except that Loans outstanding to the Chief Executive Officer may not
exceed $500,000. Each Loan must be approved by the Chief Executive Officer of
the Company; an aggregate loan limit of $500,000 to the Chief Executive Officer
has been approved by the Compensation Committee. Currently, the aggregate limit
of all Loans outstanding at any one date under the Loan Program is $2,000,000.
The term of each Loan is at least one year but not more than five
years, as specified by the senior officer entering into such Loan. Interest is
payable annually concurrently with the payment of annual bonuses to employees of
the Company and, if no such bonuses are paid in any year, then on the last
business day of such year. The rate of interest is a fixed rate equal to the
greater of (i) the rate at which the Company could have invested its funds in a
taxable fixed income investment having a term equivalent to the term of the
related loan and meeting its investment guidelines and (ii) the Applicable
Federal Rate (i.e., the rate the Company needs to charge in accordance with the
guidelines established by the Internal Revenue Service to avoid the need to
report the payment of any imputed income to the borrower in respect of the
related Loan), in each case, such rate being determined in good faith by the
Company. The principal amount of any Loan becomes payable in full on the earlier
of (i) the maturity date of such Loan, (ii) the date of the borrower's
termination of employment for reasons other than death or disability and (iii)
90 days after the date of the borrower's termination of employment due to death
or disability. "Termination of employment" means any
11
<PAGE>
termination of employment, whether voluntary or involuntary and with or without
cause, including death or permanent disability.
Any borrower under the Loan Program must sign a promissory note, pledge
such borrower's Company Common Stock to secure repayment of the Loan, and agree
to apply the proceeds of any sale of his or her Company Common Stock to the
repayment of any outstanding Loans of such borrower. Loans may be prepaid at any
time.
As of March 31, 1997, John B. Caouette, President and Chief Executive
Officer, has borrowed $500,000 under the Loan Program at an interest rate of
6.75% , with a term of five years; Ram Wertheim, Managing Director and General
Counsel, has borrowed $250,000 at an interest rate of 6.95%, with a term of five
years; and Paul Palmer, Managing Director and Chief Financial Officer, has
borrowed $160,000 at an interest rate of 6.95%, with a term of five years and
$85,000 at an interest rate of 6.90% with a term of five years. The interest
rate on each Loan is based upon the rate the Company could have invested its
funds on the date such loan was made, which was April 24, 1996, with respect to
Mr. Caouette's Loan; May 13, 1996 with respect to Mr. Wertheim's Loan; and May
13, 1996 and January 13, 1997, respectively, with respect to Mr. Palmer's Loans.
12
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Compensation
The following sets forth a summary of all compensation paid to the
Chief Executive Officer and the four other most highly compensated executive
officers (the "Named Executive Officers") of the Company and its subsidiaries
(including CapMAC) for services rendered in all capacities to the Company and
its subsidiaries for the years ended December 31, 1996, 1995 and 1994.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation (3)
------------------- ----------------
Options/
Name and Restricted SAR's
Principal Position Stock (# of All Other
Year Salary Bonus Awards (2) shares) Compensation(4)
---- ------ ----- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John B. Caouette ............... 1996 $400,000 $550,000 $ 0 114,000 $148,192
President and Chief 1995 330,000 500,000 37,808 0 123,335
Executive Officer 1994 300,000 330,000 0 0 82,411
Paul V. Palmer ................. 1996 $200,000 $275,000 $ 0 41,000 $72,595
Managing Director and Chief 1995 180,000 200,000 13,800 0 55, 478
Financial Officer 1994 165,000 160,000 0 0 40,365
C. Thomas Meyers ............... 1996 $200,000 $275,000 $ 0 41,000 $73,105
Managing Director 1995 180,000 200,000 21,045 0 55,988
1994 165,000 160,000 0 0 40,481
Maryam H. Muessel .............. 1996 $200,000 $275,000 $ 0 40,000 $70,464
Managing Director (1)
Ruth M. Whaley ................. 1996 $200,000 $275,000 $ 0 41,000 $72,118
Managing Director and Chief
Underwriting Officer (1)
</TABLE>
- - --------------------------------------------------------------------------------
(1) Ms. Muessel and Ms. Whaley each became an executive officer of the
Company during 1996.
(2) Effective with the date of the IPO, Messrs. Caouette, Palmer and Meyers
each received restricted stock with a taxable value of $1 per share.
The restricted stock vested immediately upon grant, but is limited as
to its transferability within the first two years after the date of
grant. Additionally, when any of them wishes to sell such restricted
stock, the Company has the right of first refusal to purchase the
restricted stock from such officer at the then current fair market
value less $19 (the amount determined by subtracting $1 from the IPO
price of $20). Accordingly, the table above reflects the value per
share of the restricted stock on the date of grant ($20) less the price
($19) at which the Company could have repurchased such restricted stock
upon transfer at such date, multiplied by the number of shares granted
to the individual. The holders of the restricted stock are entitled to
receive the same amount of dividends per share as holders of Common
Stock which is not restricted stock. As of the fiscal year ended
December 31, 1996, the values of the restricted stock held by the each
of Messrs.
13
<PAGE>
Caouette, Palmer and Meyers were as follows: John B.
Caouette--$534,031; Paul V. Palmer--$194,925; and C. Thomas
Meyers--$297,261. The fiscal year-end value of the restricted stock was
calculated by multiplying (i) the difference between the fiscal
year-end market price per share of the unrestricted Common Stock as
quoted on the New York Stock Exchange ("NYSE") (which was $33.125) and
$19 per share by (ii) the number of shares of the restricted stock held
by the individual at fiscal year-end.
(3) See "Option Grants in Last Fiscal Year" for a description of options
granted to the Named Executive Officers during 1996.
(4) All other compensation includes contributions from the Company to the
ESOP, Supplemental Executive Retirement Plan ("SERP"), and premiums
payable for Split-Dollar Life Insurance. The 1996 dollar values of the
ESOP and SERP contributions, and the Split-Dollar Life Insurance
premiums, respectively, are as follows: John B. Caouette--$32,572.48,
$91,619.61, $24,000; Paul V. Palmer--$32,572.48, $30,022.54, $10,000;
C. Thomas Meyers--$32,572.48, $30,022.54, $10,510; Maryam H. Muessel--
$32,572.48, $27,891.64, $10,000; and Ruth M. Whaley--$32,572.48,
$29,545.31, $10,000. The 1995 dollar values of the ESOP and SERP
contributions, and the Split-Dollar Life Insurance premiums,
respectively, are as follows: John B. Caouette--$27,467, $71,868,
$24,000; Paul V. Palmer--$27,467, $18,011, $10,000; and C. Thomas
Meyers--$27,467, $18,011, $10,510. The 1994 dollar values of the ESOP
and SERP contributions and the Split-Dollar Life Insurance premiums,
respectively, are as follows: John B. Caouette--$18,955, $39,456,
$24,000; Paul V. Palmer--$18,194, $12,171, $10,000; and C. Thomas
Meyers--$18,955, $11,016, $10,510.
14
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth, for the fiscal year ended December 31,
1996, certain information with respect to grants of stock options pursuant to
the CapMAC Holdings Inc. 1995 Omnibus Stock Incentive Plan (the "Omnibus Plan")
to the Named Executive Officers. No stock appreciation rights ("SARs") were
granted under the plan in 1996.
Individual
Grants
------
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options
Underlying Granted to Grant Date
Options Employees in Exercise Price Expiration Present
Name Granted (1) 1996 ($/Share) (2) Date Value ($)(3)
- - ---- ----------- ---- ------------- ---- ------------
<S> <C> <C> <C> <C> <C>
John B. Caouette............. 55,000 7.15% $24.50 04/01/06 $499,923
59,000 7.67% $33.625 12/04/06 $736,018
Paul V. Palmer............... 20,000 2.60% $24.50 04/01/06 $181,790
21,000 2.73% $33.625 12/04/06 $261,972
C. Thomas Meyers............. 20,000 2.60% $24.50 04/01/06 $181,790
21,000 2.73% $33.625 12/04/06 $261,972
Maryam H. Muessel............ 0 N/A N/A N/A N/A
40,000 5.20% $33.625 12/04/06 $498,995
Ruth M. Whaley............... 20,000 2.60% $24.50 04/01/06 $181,790
21,000 2.73% $33.625 12/04/06 $261,972
</TABLE>
- - --------------------------------------------------------------------------------
(1) The table reflects two sets of option grants. The first grants were
awarded at the March Compensation Committee Meeting with a grant date
of April 1, 1996 (the "April Grants"). The April Grants will vest in
two equal installments (on the fifth and sixth anniversaries of the
date of the grant), however, the vesting will accelerate on the
following basis: (a) 25% of the option shares become exercisable
commencing on the first day after the date that is the fifth
consecutive trading day on which the fair market value is at least
$30.63 per share; (b) 50% of the option shares become exercisable
commencing on the first day after the date that is the fifth
consecutive trading day on which the fair market value is at least
$36.75 per share; (c) 100% of the option shares become exercisable
commencing on the first day after the date that is the fifth
consecutive trading day on which the fair market value is at least
$42.87 per share.
The second grants were awarded at the December Compensation Committee
Meeting with a grant date of December 4, 1996 (the "December Grants").
The December Grants will vest in two equal installments (on the fifth
and sixth anniversaries of the date of the grant), however, the vesting
will accelerate on the following basis: (a) 25% of the option shares
become exercisable commencing on the first day after the date that is
the fifth consecutive trading day on which the fair market value of at
least $42.03 per share; (b) 50% of the option shares become exercisable
commencing on the first day after the date that is the fifth
consecutive trading day on which the fair market value is at least
$50.44 per share; (c) 100% of the option shares become exercisable
commencing on the first day after the date that is the fifth
consecutive trading day on which the fair market value is at least
$58.84 per share.
15
<PAGE>
(2) The exercise price per share for the April Grants is the closing price
of the Common Stock as reported on the NYSE Composite Tape on the date
of the grant. The exercise price per share for the December Grants is
the fair market value of the Common Stock on the date of grant,
determined by calculating the average of the high and low price of the
Common Stock as reported on the NYSE Composite Tape on the date of the
grant.
(3) The grant date present values shown in the table are determined using
the Black-Scholes option pricing model. The assumptions used in
calculating the Black-Scholes present values were as follows: (a) a
risk-free rate of return of 6.58%, which was the three year average of
the rate on a 7-year U.S. Treasury bond ending December 31, 1996
(corresponding to the expected life of the options); (ii) a stock price
volatility of 25.47%, calculated using month-end prices of the Common
Stock on the NYSE Composite Tape for the period beginning at the IPO in
December, 1995 and ending in December, 1996; (iii) an annualized
dividend yield of .22%; and (iv) that the options would normally be
exercised seven years from the date of grant (which was April 1, 1996
for the April Grants and December 4, 1996 for the December Grants).
The Black-Scholes option pricing model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. In addition, option pricing
models require the use of highly subjective assumptions, including the
expected stock price volatility. Because the employee stock options
granted to the Named Executive Officers have characteristics
significantly different from those of traded options, and because
changes in the subjective assumptions can materially affect the fair
value estimates, the Black-Scholes model does not necessarily provide a
reliable single measure of the fair value of the options granted. The
amount realized from an employee option ultimately depends on the
market value of the Common Stock on the date of exercise.
16
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth for 1996 certain information with
respect to the Named Executive Officers: (i) the exercise of stock options and
the value realized, (ii) the total number of securities underlying unexercised
options, and (iii) the value of unexercised "in-the-money" stock options
outstanding. ("In-the-money" stock options are options for which the exercise
price is less than the market price of the underlying stock on a particular
date.) No executive officer or any other employee of the Company held or
exercised any SARs at any time during 1996.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options Held at Held at
December 31, 1996 December 31, 1996 (1)
----------------- ---------------------
Number of
Shares
Acquired on Dollar Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- - ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John B. Caouette 312,069.5 100,250 $6,023,828 $355,781
Paul V. Palmer 251,759 36,000 $4,927,719 $129,375
C. Thomas Meyers 60,000.0 $1,187,700 96,283 36,000 $1,850,082 $129,375
Maryam H. Muessel 43,717.5 40,000 $745,338 0
Ruth M. Whaley 22,843 36,000 $388,157 $129,375
</TABLE>
- - --------------------------------------------------------------------------------
(1) This valuation represents the difference between $33.125, the closing
price of the Common Stock on the NYSE on December 31, 1996, and the
exercise price of the stock options ($33.625 for the December Grants;
$24.50 for the December Grants 1994 and; $13.33 for options granted in
1992 and $20.00 for options granted in 1995).
Retirement Plan and Supplemental Retirement Plan
Employees of the Company, including the Named Executive Officers, are
entitled to benefits from the Company's retirement plan, which is an ESOP. The
plan permits employees to obtain beneficial interests in the stock of the
Company through a trust (the "ESOP Trust"). In 1992, the ESOP Trust purchased
750,000 shares from the Company at $13.33 per share. The ESOP Trust financed its
purchase of Common Stock with a loan from the Company in the amount of $10
million. The Trustee for the ESOP is Marine Midland Bank, N.A.
Each year, as the Company's subsidiary CapMAC Financial Services, Inc.
makes a contribution to the ESOP, a corresponding loan payment is made, and the
ESOP Trust releases shares of stock of the accounts under the ESOP for the
eligible participants, including each of the Named Executive Officers.
Due to compensation limitations and contribution limitations applicable
to qualified plans under the Internal Revenue Code, the Named Executive Officers
receive a less than pro rata share of the annual ESOP allocation in relation to
their total compensation. The Company has therefore adopted, for such
executives,
17
<PAGE>
a Supplemental Executive Retirement Plan (a "SERP"). The SERP is a non-qualified
plan that allows each eligible executive the excess contribution which cannot be
received in the ESOP. This amount is placed into an account and participants may
direct its investment. This amount is placed into an account and invested by the
Company. As of December 31, 1996, all the Named Executive Officers were eligible
for the SERP. Through December 31, 1996, approximately $0.8 million had been
contributed to the SERP.
Employment Agreements
Messrs. Caouette, Palmer and Meyers are parties to employment
agreements dated as of June 25, 1992 with the Company. Under the agreements, the
Company agrees to employ these executives in their current titles and with their
current responsibilities, until June 25, 1997. Mr. Caouette's agreement is
subject to automatic renewals for one-year terms unless he or the Company has
given 60 days prior written notice of his or its election not to extend. This
automatic renewal ends on June 25, 1999. In the event of death or disability,
the executive or his/her estate or beneficiaries will receive the executive's
base salary for 18 months in the case of disability and for 6 months in the
event of death. In addition, an amount equal to the pro rata portion of the
bonus, determined using the target annual bonus of the executive, shall be paid.
The agreement terminates upon the retirement of the executive. In the event of
termination other than voluntary termination, an involuntary termination with
cause, or termination for disability, death or retirement (as stated above), the
above named executive officers are entitled to receive the higher of (x) the
base salary payable to the executive for the period commencing on the
termination date and ending on the last day of the employment period, (y) 200%
of the executive's base salary and (z) the amount payable under the Company's
then applicable severance policy. They are also entitled to continuation for a
period of 12 months of any health or disability coverage provided by the Company
to the executive prior to such termination of employment. The executive is
entitled to an amount equal to the pro rata portion of the bonus determined
using the target annual bonus of the executive.
The employment agreements provide for the following minimum annual
salaries, which are to be reviewed annually and may be increased from time to
time but not decreased by the Compensation Committee: Mr. Caouette $300,000, Mr.
Palmer $165,000 and Mr. Meyers $165,000. Each of these executive officers, other
than Mr. Caouette, is entitled to receive an annual bonus determined by Mr.
Caouette and approved by the Compensation Committee of the Board. In the case of
Mr. Caouette, his bonus is determined by, and in the sole discretion of, the
Compensation Committee of the Board. In addition, each of the executive officers
is entitled to participate in the Company's ESOP and health and welfare benefit
plans for its employees, to participate in supplemental benefit plans for its
executive officers, to four weeks of paid vacation per year and to reimbursement
for certain expenses.
18
<PAGE>
- - --------------------------------------------------------------------------------
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") determines the compensation of John B. Caouette, Chairman, President
and Chief Executive Officer of the Company, and the other executive officers of
the Company as a group and approves the compensation recommendations made by
senior management for other employees of the Company. The members of the
Compensation Committee are non-employee directors of the Company.
The Compensation Committee has designed an executive compensation program which
attempts to align executive pay with the Company's performance and the creation
of shareholder value. The objectives of this program are to attract, motivate
and retain key executives and other professionals, and reward exemplary
performance, with compensation which is competitive and which aligns the
interests of executives with the fortunes of the Company and the long-term
interests of stockholders.
The Company compensates its executives through (i) base salary, (ii) annual
incentive bonus, and (iii) long-term incentive awards in the form of stock
options. The Company also provides its executive officers with employee
benefits, such as retirement and health benefits, consistent with those
typically offered to executives by the Company's competitors.
In late 1995, the Compensation Committee engaged Strategic Compensation
Associates ("SCA"), an outside consultant that specializes in executive
compensation, to do a broad analysis of compensation for senior officers of the
Company and its subsidiaries and to make recommendations for the Compensation
Committee's consideration with respect to the Company's executive compensation
plan. During the course of 1996, SCA prepared several reports and had several
discussions with members of the Compensation Committee to report on the results
of its survey and analysis and to discuss its recommendations.
In analyzing the Company's compensation plans and making recommendations to the
Compensation Committee with respect to executive compensation, SCA compared the
Company's compensation plans for senior officers to other monoline financial
guarantee insurance companies, reinsurance companies, commercial banks and
rating agencies and also compared the relative performance and growth of the
Company to its competitors. In its review of compensation for 1996, the
Compensation Committee considered the comparative data and recommendations
prepared by SCA.
Base Salaries
The Compensation Committee annually reviews the base salaries of its executives
to determine whether adjustments are appropriate to ensure that their salaries
are competitive and to reflect the increased responsibilities of the executives
as the Company grows.
Based on an industry and data provided by SCA, it was determined that total cash
compensation of the chief executive officer and the other senior executive
officers of the Company were generally at or below the median level of salaries
of the group surveyed. The Compensation Committee determined that given the
Company's strong performance, it was appropriate that the overall compensation
paid to the Chief Executive Officer and other senior executive officers of the
Company should be at or above the median level of the group surveyed based on
the Company's performance relative to its competitors. The Compensation
Committee determined to increase base salaries to a level that would be somewhat
less than the median base
- - --------------------------------------------------------------------------------
19
<PAGE>
- - --------------------------------------------------------------------------------
salary level set forth in the survey and to make any further adjustments to cash
compensation necessary to bring total compensation to or above the median level
by making appropriate adjustments to the bonuses paid to the senior executive
officers, subject to the performance criteria established for the payment of
bonuses.
Accordingly, the Compensation Committee approved an increase in base salary for
John B. Caouette for 1996 to $400,000 from $330,000 and an increase in the base
salaries of certain senior executive officers to $200,000 from $180,000 in 1995.
In considering Mr. Caouette's base salary, the Compensation Committee utilized
the comparative data and considered the Company's performance and Mr. Caouette's
individual performance.
Annual Incentive Compensation
General. The Company maintains a bonus plan which provides for annual bonuses to
all executive officers and other employees. Except for the senior executives,
whose bonuses are directly set by the Compensation Committee, bonuses are first
recommended by the individual manager, then approved (and adjusted, if
appropriate) by the senior management of the Company. After an aggregate number
is reached, the Compensation Committee approves the aggregate bonus awards and,
in certain cases, bonus awards to certain key employees.
The aggregate amount of the bonus pool available for the payment of bonuses is
based primarily on the Company's success in meeting financial performance
targets, although it remains at all times subject to the discretion of the
Compensation Committee. In 1996, a target bonus pool for senior executives was
established based on the Company achieving a target net income of $31 million,
representing a 44% increase from net income of approximately $22.9 million in
1995, with the bonus pool to be adjusted upwards or downwards for net income
performance above or below the target net income. The Compensation Committee
also determined that if the Company exceeded the target net income, any
additional bonus compensation paid to officers of the Company would be partly
paid in cash and partly in the form of stock options or other equity
compensation.
The Company's $33.5 million net income for 1996 exceeded the net income target
by approximately $2.4MM. In accordance with the Compensation Committee's desire
to pay part of any incremental compensation for exceeding the net income target
partly in cash and partly in the form of stock options, the Compensation
Committee approved an additional $550,368 to be allocated to the bonus pool and
the issuance of an additional 130,000 stock options to selected employees under
the Omnibus Plan (as defined below). The number of additional stock options
awarded was determined based on a valuation done by SCA. In order to provide
sufficient stock option awards for 1996 and for awards in future years, the
Compensation Committee approved an additional 1,500,000 options to be issued
under the Omnibus Plan.
Annual Incentive Compensation for the Chief Executive Officer. For 1996, based
on the Company's strong financial performance and the achievement of a number of
strategic objectives, the Compensation Committee awarded Mr. Caouette a bonus of
$550,000. This was 144% of his 1996 base salary, and an increase of
approximately 10% from his 1995 bonus of $500,000.
Other Incentive Awards. In 1995 the Company adopted the "CapMAC Holdings Inc.
1995 Omnibus Stock Incentive Plan" (the "Omnibus Plan"), pursuant to which the
Compensation Committee may award stock options, stock appreciation rights,
restricted stock and other forms of equity awards to employees as an added
incentive for continued achievement to encourage the alignment of the interests
of the employees with that
- - --------------------------------------------------------------------------------
20
<PAGE>
- - --------------------------------------------------------------------------------
of the shareholders. Awards are granted to selected employees based on their
individual contributions to the Company. The specific terms and provisions of
awards under the Omnibus Plan are determined by the Compensation Committee.
Options to purchase 769,500 shares of stock were awarded to employees of the
Company and its subsidiaries under the Omnibus Plan in 1996. The total number of
stock options issued in 1996 includes 195,000 stock options that were issued to
the Chief Executive Officer and other members of senior management in light of
the recommendations made by SCA and 130,000 stock options that were issued to
select employees to reflect the Company's performance in excess of the target
net income that was established early in 1996.
Policy with Respect to $1 Million Deduction Limit
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, effective
for tax years beginning in 1994, the Company is generally precluded from
deducting compensation in excess of $1 million per year for its Chief Executive
Officer and any of its four highest-paid executive officers, unless the payments
are made under qualifying performance-based plans. The new tax provision had no
effect on the Company in 1996. Because the Compensation Committee intends to
provide additional compensation to senior executives in the form of stock
options or other equity based awards in 1997, the Compensation Committee has
determined that it is unlikely that the Company will pay compensation in 1997
that would result in any loss of federal tax deduction under Section 162(m), and
accordingly has not recommended that any other actions be taken as a result of
such provision.
March 31, 1997
Steve Green
George Jenkins
James H. Laird (Chairman)
Mike Horgan
Doren W. Russler
- - --------------------------------------------------------------------------------
21
<PAGE>
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
stockholder return on the Common Stock with the comparable cumulative returns of
two indices for equal investment amounts made on December 14, 1995 (the first
day of trading on the New York Stock Exchange of the Company's Common Stock).
The graph assumes that all dividends were reinvested. This line graph is
presented in accordance with the requirements of the SEC. Stockholders are
cautioned against drawing any conclusions from the data contained therein as
past results are not necessarily indicative of future performance.
[The following table was depicted in the printed material as a line graph]
COMPARISON OF 12 MONTH CUMULATIVE TOTAL RETURN*
AMONG CAPMAC HOLDINGS INC., THE S & P INDEX
AND THE S & P FINANCIAL INDEX
DOLLARS
-------
12/14/95 12/95 12/96
-------- ----- -----
CAPMAC HOLDINGS INC. $100 $126 $166
S & P 500 $100 $101 $125
S & P FINANCIAL $100 $102 $137
* $100 INVESTED ON 12/14/95 IN STOCK OR ON 11/30/95 IN INDEX - INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
22
<PAGE>
SECTION 16(a) REPORTING DELINQUENCIES
Each director and executive officer of the Company, and each beneficial
owner of more than 10% of the Company's Common Stock, is required under Section
16 of the Exchange Act to report to the SEC, the NYSE and the Company, by a
specified date, all transactions in the Company's stock.
Based solely on a review of the reports furnished to it pursuant to
Section 16, and on representations from certain reporting persons, the Company
believes that applicable reporting requirements were complied with.
PROPOSAL NO. 2
RATIFICATION OF THE SELECTION OF THE COMPANY'S INDEPENDENT AUDITORS
The ratification of the selection of KPMG Peat Marwick LLP to serve as
independent auditors of the Company for the current fiscal year ending December
31, 1997 will be submitted to the 1997 Annual Meeting. The selection of KPMG
Peat Marwick LLP was recommended to the Board by the Audit Committee. The
selection will be considered ratified if the holders of a majority of the
aggregate number of shares of Common Stock outstanding present in person or
represented by proxy, vote for ratification at the 1997 Annual Meeting when a
quorum is present. If the stockholders do not ratify the selection of
independent auditors, the Board will consider it a direction to consider
selecting other auditors for the subsequent year. Even if the stockholders
ratify the selection, the Board, in its discretion, may still direct the
appointment of new independent auditors at any time during the year if the Board
believes that such a change would be in the best interests of the Company and
the stockholders.
At least one representative of KPMG Peat Marwick LLP is expected to be
present at the 1997 Annual Meeting. This representative will have the
opportunity to make a statement if he or she desires and will be available to
answer questions from stockholders. KPMG Peat Marwick LLP has served as auditors
for the Company since it was established. During 1996, KPMG Peat Marwick LLP
examined the accounts of the Company and its subsidiaries and also provided
other audit services in connection with SEC filings.
The Board recommends a vote FOR this proposal, which is identified as
Proposal No. 2 on the enclosed proxy card.
PROPOSAL NO. 3
AMENDMENT OF THE OMNIBUS STOCK INCENTIVE PLAN
Shareholders are being requested to approve the amendment of the CapMAC
Holdings Inc. 1995 Omnibus Stock Incentive Plan (the "Omnibus Plan") (i) to
increase by 1,500,000 shares the maximum number of shares of Common Stock
available for grant under the Omnibus Plan and (ii) to satisfy the requirements
necessary for exemption from the deduction limitation under the final
regulations issued under Section 162(m) of the Internal Revenue Code of 1986, as
amended ("Section 162(m)"), with respect to stock options and stock appreciation
rights by limiting to 200,000 the number of shares which can be issued to any
one individual in a single calendar year (the "Omnibus Plan Amendments"). The
Omnibus Plan Amendments have been approved by the Compensation Committee acting
under authority delegated to it by the full Board.
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Description of Omnibus Stock Incentive Plan
General. In 1995, before the closing of the IPO, the Company adopted,
with shareholder approval, the Omnibus Plan pursuant to which multiple types of
stock-based grants are available to key employees, as designated by the
Compensation Committee. The purpose of the Omnibus Plan is to promote the
long-term financial interests and growth of the Company and its subsidiaries by
attracting and retaining management personnel who can make a substantial
contribution to the success of the Company's business; to motivate management
personnel by means of growth-related incentives to achieve long range goals; and
to further the identity of interests of participants in the plan with that of
the Company through opportunities for increased stock, or stock-based, ownership
in the Company. Any key employee of the Company and its subsidiaries approved by
the Compensation Committee is eligible to receive grants under the Omnibus Plan.
Originally, 1,005,000 shares of Common Stock were made available under
the Omnibus Plan. After giving effect to the grant of options to purchase
198,000 shares of Common Stock and the grant of 182,633 shares of restricted
stock under the Omnibus Plan in 1995, the grant of options to purchase 769,500
shares of stock under the Omnibus Plan in 1996, the increase approved by the
Compensation Committee 1,500,000 shares available for grant for which approval
is sought from shareholders, and the forfeiture and exercise of previously
issued stock options, there were 1,358,617 shares available for grant as of
December 31, 1996. This number may be increased from time to time to the extent
grants under the Omnibus Plan are forfeited, terminated, canceled or expired
unexercised, or to the extent shares are delivered or withheld to pay the
exercise price or satisfy withholding obligations.
Options to purchase 544,500 shares of Common Stock were granted in
December, 1996 (the "December Grants"). Of these, 287,000 options were granted
to executive officers and 257,500 were granted to other employees. The exercise
price of the December Grants is $335/8 per share. No options were granted to
directors (or their affiliates) other than the CEO, John B. Caouette. The
December Grants vest in two equal installments (on the fifth and sixth
anniversaries of the date of the grant); however, the vesting will accelerate on
the following basis: (a) 25% of the option shares become exercisable commencing
on the first day after the date that is the fifth consecutive trading day on
which the fair market value of at least $42.03 per share; (b) 50% of the option
shares become exercisable commencing on the first day after the date that is the
fifth consecutive trading day on which the fair market value is at least $50.44
per share; (c) 100% of the option shares become exercisable commencing on the
first day after the date that is the fifth consecutive trading day on which the
fair market value is at least $58.84 per share. See "Option Grants in Last
Fiscal Year" for details of options granted in 1996 to Named Executive Officers
and the "Compensation Committee Report on Executive Compensation" for a general
discussion of options and other incentive compensation granted in 1996. The
closing price of the Common Stock on the NYSE on April 1, 1997 was $267/8.
To comply with Section 162(m) with respect to stock options and stock
appreciation rights ("SARs"), the Omnibus Plan has been amended, approval for
which is being sought from shareholders, to provide that the maximum number of
shares of Common Stock which may be subject to any stock option granted to a
participant under the Omnibus Plan may not exceed 200,000 shares of Common Stock
(subject to certain adjustments described below) for each calendar year during
the term of the Omnibus Plan. Any shares of Common Stock previously issued under
the Omnibus Plan and thereafter returned to the Company for any reason and any
shares of Common Stock set aside for issuance upon the exercise of any award
which is terminated prior to such issuance are not charged against the total
number of shares of Common Stock reserved for option or SAR issuance and are
thereafter available for grant under the Omnibus Plan. In accordance with
Section 162(m), if a stock option or SAR previously granted to a participant is
canceled,
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the canceled stock option or SAR will be counted against the number of shares of
Common Stock for which stock options or SARs may be granted to that participant
under the Omnibus Plan.
The Omnibus Plan is administered by the Compensation Committee, which
consists of members of the Board who are "disinterested persons" within the
meaning of the rules promulgated under the Exchange Act. The Compensation
Committee selects or approves the selection of recipients of grants, the number
of shares subject to each grant and the terms and conditions of such grants and
establishes such conditions as to the manner of exercise of such grants as it
may deem necessary. The Compensation Committee may accelerate the time at which
outstanding grants may be exercised, including upon certain events involving a
change in control of the Company, and has the discretion to provide that
outstanding grants may not be exercised subsequent to a merger, consolidation or
certain other corporate events.
Each grant under the Omnibus Plan is subject to the terms, conditions
and limitations set forth in the grant agreement approved by the Compensation
Committee and must be consistent with the purposes set forth in the Omnibus
Plan. The terms and conditions may include, without limitation, vesting and
exercisability periods or restrictions and the effect on a grant of a
termination or change in employment status of a participant in the Omnibus Plan.
No grants may be made under the Omnibus Plan beyond ten years after the
effective date of such plan, but the terms of specific grants under the Omnibus
Plan made on or before the expiration thereof may extend beyond such expiration.
Specific awards to be granted under the Omnibus Plan after April 7, 1997 cannot
presently be determined. In addition, nothing contained in the Omnibus Plan
prevents the Company or any of its subsidiaries or affiliates from adopting or
continuing in effect other compensation arrangements.
Securities Issued under the Omnibus Plan. The Compensation Committee
may make grants of (i) Incentive Stock Options, (ii) Other Stock Options, (iii)
Stock Appreciation Rights, (iv) Restricted Stock, (v) Limited Stock Appreciation
Rights, (vi) Dividend Equivalent Rights, (vii) Performance Units, (viii)
Performance Shares and (ix) Other Stock-Based Grants. Through the date of this
Proxy Statement, only Other Stock Options and Restricted Stock have been issued
under the Omnibus Plan.
Incentive Stock Options. "Incentive Stock Options" are stock options
within the meaning of Section 422 of the Code to purchase Common Stock.
In order for an option to qualify as an "Incentive Stock Option" under
the Omnibus Plan, in addition to meeting the requirements under the
Code, the option must be designated as an "Incentive Stock Option" by
the Compensation Committee, may not be exercised more than ten years
after the date on which it is granted and may not have an exercise
price less than the fair market value of the Common Stock on the date
of grant. The maximum fair market value of the Common Stock (as
determined on the date of grant) with respect to which any participant
in the Omnibus Plan may first exercise Incentive Stock Options is
$100,000, and the maximum fair market value of Incentive Stock Options
which can be granted to any participant in any year is $100,000.
Other Stock Options. "Other Stock Options" are stock options granted by
the Compensation Committee which do not qualify as Incentive Stock
Options. In addition to the specific provisions regarding the option
price and option exercise conditions set forth in the specific grant,
no Other Stock Option may be exercised more than ten years after the
date on which it is granted or have an option exercise price less than
50% of the fair market value of the Common Stock on the date such
option is granted. All stock options granted under the Omnibus Plan in
1995 and 1996 qualified as Other Stock Options. The exercise price of
all such options are their fair market value on their respective dates
of grant.
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Stock Appreciation Rights. "Stock Appreciation Rights" or "SARs" are
rights that entitle the holder to receive the excess of the fair market
value of shares of Common Stock on the date of exercise over the fair
market value of such Common Stock on the date of grant. SARs may not be
exercised more than ten years after the date on which they are granted
and may be subject to such conditions or restrictions as are set forth
in the grant agreements relating thereto.
Restricted Stock. "Restricted Stock" is Common Stock delivered to a
participant with restrictions or conditions on the participant's right
to transfer or sell such stock.
182,633 shares of Restricted Stock were issued pursuant to the Omnibus
Plan upon consummation of the IPO to certain officers of the Company,
including the Named Executive Officers. As set forth in the Deferred
Compensation and Restricted Stock Agreements relating to the grants of
such Restricted Stock, the Restricted Stock (i) may not be transferred
until the earlier of two years from the date of grant or termination of
the executive's employment with the Company and (ii) in the event the
holder proposes to transfer such Restricted Stock, the Company has the
option to purchase such Restricted Stock for an amount equal to the
market price per share on the date of the proposed transfer minus
$19.00.
Limited Stock Appreciation Rights. "Limited Stock Appreciation Rights"
or Limited SARs are rights that may only be exercised during a 60-day
period following certain change of control events with respect to the
Company. The holder of a Limited SAR may exercise such rights during
the applicable period whether or not such holder remains employed by
the Company. Upon exercise, the holder of a Limited SAR is entitled to
receive in cash the greater of (i) the excess of the fair market value
of the Common Stock over the exercise price of such shares under the
Omnibus Plan and (ii) if the change of control event triggering the
60-day exercise period is the result of a transaction or series of
transactions, the highest price per share of Common Stock paid in such
transaction or transactions during such period up to the date of
exercise over the exercise price per share.
Dividend Equivalent Units. "Dividend Equivalent Units" are rights to
receive cash payments from the Company at the same time and in the same
amount as any cash dividends paid on an equal number of shares of
Common Stock during the period such rights are effective.
Performance Units. "Performance Units" are rights to receive, at a
specified future date, payment in cash of an amount equal to all or a
portion of the value of a unit granted by the Compensation Committee.
At the time a Performance Unit is granted, the Compensation Committee
will determine the base value of such unit, the performance factors
applicable to the determination of the ultimate payment value of the
unit and the period over which the Company's performance will be
measured, which period may not be less than six months.
Performance Shares. "Performance Shares" are rights to receive, at a
specified future date, payment in cash or Common Stock of an amount
equal to all or a portion of the average of the fair market value of a
share of Common Stock multiplied by a specified number of shares of
Common Stock. As with Performance Units, the Compensation Committee
will determine the performance factors applicable to the determination
of the payment and the period over which the Company's performance will
be measured, which period may not be less than six months.
Other Stock-Based Grants. The Compensation Committee may make other
grants under the
26
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Omnibus Plan pursuant to which Common Stock or other stock units may be
acquired, including grants which are valued using measures other than
market value. Such "Other Stock-Based Grants" may be granted with or
without consideration, provided that the price of any such grant made
for consideration other than services that provides for the acquisition
of shares of Common Stock or other equity securities of the Company may
not be less than 50% of the fair market value as of the date of grant.
Exercise and Payment of Stock Options. Options granted pursuant to the
Omnibus Plan are exercisable, at the discretion of the Compensation Committee,
by delivery of a written notice of exercise and (i) payment of the full exercise
price of the shares being purchased in cash, or by check, bank draft or money
order payable to the order of the Company, (ii) through delivery of shares of
Common Stock (which the participant has held for at least six months or which
the participant purchased on the open market) with an aggregate fair market
value equal to the exercise price of the options, (iii) by delivery of an
irrevocable notice of exercise to a financial institution acceptable to the
Company to deliver promptly to the Company the portion of sale or loan proceeds
sufficient to pay the exercise price, (iv) through the written election of the
participant to have shares of Common Stock withheld by the Corporation from the
shares otherwise to be received, with such withheld shares having an aggregate
fair market value on the date of exercise equal to exercise price plus any tax
withholding obligations due in connection with such exercise, or (v) any
combination of the foregoing methods of payment. The Company has established a
program with a nationally recognized broker-dealer to facilitate the exercise of
stock options by employees. To date, all stock options have been exercised
through this broker-dealer.
Nontransferability. Except as otherwise permitted by the Compensation
Committee, no stock option or other stock-based grant which constitutes a
derivative security (as defined in Rule 16 under the Exchange Act) may be
transferred other than (i) by will, the laws of descent and distribution or
pursuant to beneficiary designation procedures approved by the Company or (ii)
subject to attachment, execution or other similar process.
Change of Control. The Compensation Committee may provide, in its
absolute discretion either at the time of a grant or at any time thereafter,
that the grant of a stock option or other stock-based grant cannot be exercised
after certain change of control events, such as a merger or consolidation of the
Company into another corporation, the exchange or sale of substantially all of
the Company's assets, or the recapitalization, reclassification, liquidation or
dissolution of the Company. If the Compensation Committee does so provide, it
shall also provide, in its absolute discretion and on such terms and conditions
as it deems appropriate, that during some period of time prior to such change of
control event, such stock options or other stock-based grants be exercisable for
the kind and amount of securities and/or other property (or the cash equivalent
thereof) provided for in such stock option or stock-based grant, and that upon
the occurrence of such event, the right to exercise such stock-option or other
stock-based grant shall terminate.
Amendment and Termination. The Compensation Committee has the authority
to make such amendment to any terms and conditions applicable to outstanding
grants as are consistent with the Omnibus Plan; provided, however, that such
amendment may not modify such grant in a manner that is materially adverse to
any recipient of a grant under the Omnibus Plan without such person's consent.
The Compensation Committee may accelerate or waive vesting periods and extend
the exercisability of options or stock-based grants, provided that such
exercisability may not extend past ten years from the date of the grant of such
stock options or stock-based grants. The Board may amend, suspend or terminate
the Omnibus Plan, except that no action may be taken which would, without
shareholder approval, result in a loss of an exemption under Section 16 of the
Exchange Act.
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Federal Income Tax Consequences
Incentive Stock Options. Incentive stock options are intended to
qualify for favorable federal income tax treatment under Section 422 of the
Code. In general, neither the grant nor the exercise of an incentive stock
option will result in taxable income to the participant or a deduction to the
Company.
If a person holding an option (the "Optionee") which was designated as
an incentive stock option does not dispose of the shares acquired on the
exercise of such option within one year after the transfer of such shares to him
or within two years from the date the incentive stock option was granted to him,
for federal income tax purposes: (i) the Optionee will not recognize any income
at the time of exercise of the incentive stock option; (ii) the amount by which
the fair market value of the shares at the time of exercise exceeds the exercise
price is an item of tax preference subject to the alternative minimum tax on
individuals; and (iii) the difference between the exercise price and the amount
realized upon the sale of the shares of the Optionee will be treated as a
long-term capital gain or loss. The Company will not be entitled to a deduction
upon the exercise of an incentive stock option. Except in the case of a
disposition following the death of an Optionee and certain other very limited
exceptions, if the shares acquired pursuant to an incentive stock option are not
held for the minimum periods described above, the excess of the fair market
value of the shares at the time of exercise over the amount paid for the shares
generally will be taxed as ordinary income to the Optionee in the year of the
exercise and the Company will be entitled to a deduction in the same amount.
None of the options granted to date are incentive stock options.
Other Stock Options. An Optionee will not realize any income at the
time an Other Stock Option is granted nor will the Company be entitled to a
deduction at that time. Upon the exercise of an Other Stock Option, the Optionee
will recognize ordinary income (whether the exercise price is paid in cash,
pursuant to a cashless exercise or by delivery of previously owned shares) in an
amount equal to the difference between the exercise price and the fair market
value of the shares to which the Other Stock Option pertains. The Company will
be entitled to a tax deduction in an amount equal to the amount of ordinary
income realized by the Optionee in connection with the exercise of the Other
Stock Option.
Under Omnibus Plan, in a cashless exercise, in the discretion of the
Compensation Committee, the Optionee may authorize the Company to withhold
shares to satisfy the Optionee's tax withholding liability incurred upon
exercise of the option. Alternatively, the Optionee may deliver to the Company
shares of Common Stock already owned by the Optionee in order to satisfy such
tax withholding liability.
Restricted Stock. The holder of Restricted Stock will realize income as
a result of the award of Restricted Stock at the time the restrictions expire on
such shares, unless the holder makes a voluntary election under Section 83(b) of
the Code. Such an election would have the effect of causing the holder to
realize income in the year in which such Restricted Stock was granted. The
amount of income realized will be the difference between the fair market value
of the shares on the date that such restrictions expire (or on the date of
issuance of the shares, in the event of a Section 83(b) election) and the
purchase price, if any, of such shares. The Company will be entitled to a
deduction in an amount equal to the ordinary income realized in connection with
the issuance or vesting of the Restricted Stock.
SARs/Limited SARs. A holder of SARs or Limited SARs will recognize
income at the time the shares or issued or the cash is paid, as applicable. The
amount of income realized will be equal to the excess of (i) the fair market
value on the date of exercise of the shares issued and/or the amount of cash
received over (ii) the base price or exercise price established for the SARs or
Limited SARs. The Company will be
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entitled to a deduction in an amount equal to the ordinary income realized by
the holder.
Dividend Equivalent Units. The amounts received by the holder of such
units will be taxable to the holder as ordinary income when received and the
Company will be entitled to a corresponding deduction.
Performance Units/Performance Shares. The amount of cash or the fair
market value of the shares paid to an employee in respect of such Performance
Units or Performance Shares will be taxable to the employee as ordinary income
when paid and the Company will be entitled to a corresponding deduction.
Section 162(m). In general, Section 162(m) denies a publicly held
corporation a deduction for Federal income tax purposes for compensation
purposes in excess of $1,000,000 per year per person to its chief executive
officer and the four other officers whose compensation is disclosed in its proxy
statement, subject to certain exceptions. Stock options and SARs will generally
qualify under one of these exceptions if they are granted under a plan that
states the maximum number of shares with respect to which stock options or SARs
may be granted to any employee during a specified period and the plan under
which the stock options or SARs are granted is approved by the corporation's
shareholders and is administered by a compensation committee composed of outside
directors. The Compensation Committee has approved the amendment of the Omnibus
Plan to satisfy these requirements with respect to stock options and SARs.
Omnibus Plan Amendments; Vote Required
As noted above, shareholder approval is sought (i) to increase by
1,500,000 shares the maximum number of shares of Common Stock available for
under the Omnibus Plan and (ii) to satisfy the requirements necessary for
exemption from the deduction limitation under the final regulations issued under
Section 162(m), with respect to stock options and stock appreciation rights by
limiting to 200,000 the number of shares which can be issued to any one
individual in a single calendar year. The Board believes that the Company's
ability to make additional grants under the Omnibus Plan is important to its
ability to attract and retain management personnel who can make a substantial
contribution to the success of the Company's business.
The Board recommends a vote FOR approval of the Omnibus Plan
Amendments, which is identified as Proposal No. 3 on the enclosed proxy card.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for presentation to the
1998 Annual Meeting of Stockholders must submit the proposal to CapMAC Holdings
Inc., 885 Third Avenue, New York, New York 10022, Attn: Secretary and General
Counsel, not later than December 8, 1997 for inclusion, if appropriate, in the
Company's Proxy Statement and the form of proxy relating to the 1998 Annual
Meeting.
FINANCIAL STATEMENTS
The financial statements of the Company are contained in the 1996
Annual Report to Stockholders, which are being distributed together with this
Proxy Statement. Such report and the financial statements
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contained therein are not to be considered as a part of this soliciting
material.
OTHER BUSINESS
The Board knows of no other matters to be brought before the 1997
Annual Meeting other than as set forth above. However, if any other business
should properly come before the meeting, the persons named in the proxy intend
to vote in accordance with their best judgment.
MISCELLANEOUS
The cost of preparing and mailing this notice and statement and the
enclosed proxy card will be borne by the Company.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, filed by the Company with the SEC, is available on request by
writing to Investor Relations, CapMAC Holdings Inc., 885 Third Avenue, New York,
New York 10022.
By Order of the Board of Directors,
/s/ Ram D. Wertheim,
Ram D. Wertheim,
Secretary
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CAPMAC HOLDINGS INC.
1995 OMNIBUS STOCK INCENTIVE PLAN
EFFECTIVE AS OF NOVEMBER 15, 1995
AND AS AMENDED THROUGH APRIL 3, 1997
1. Purpose of Plan
The CapMAC Holdings Inc. 1995 Omnibus Stock Incentive Plan (the "Plan")
is designed:
(a) to promote the long term financial interests and growth of CapMAC
Holdings Inc. (the "Corporation") and its Subsidiaries (as defined below) by
attracting and retaining management personnel with the training, experience and
ability to enable them to make a substantial contribution to the success of the
Corporation's business;
(b) to motivate management personnel by means of growth-related
incentives to achieve long range goals; and
(c) to further the identity of interests of Participants (as defined
below) with those of the stockholders of the Corporation through opportunities
for increased stock, or stock-based, ownership in the Corporation.
2. Definitions
As used in the Plan, the following words shall have the following
meanings:
(a) "Board of Directors" means the Board of Directors of the
Corporation.
(b) "Change of Control Event" means a change of control of the nature
that would be required to be reported in response to item 1(a) of the Current
Report on Form 8-K as in effect on November 15, 1995, pursuant to Section 13 or
15(d) of the Exchange Act, provided that, without limitation, a "Change of
Control Event" shall be deemed to have occurred if (i) any person shall become
the beneficial owner, as those terms are defined herein, of capital stock of the
Corporation, the voting power of which constitutes 20% or more of the general
voting power of all of the Corporation's outstanding capital stock or (ii)
individuals who, as of November 15, 1995, constitute the Board of Directors (the
"Incumbent Board") cease for any reasons to constitute at least a majority of
the Board of Directors, provided that any person becoming a Director subsequent
to November 15, 1995, whose election or nomination for election by the
Corporation's shareholders, was approved by a vote of at least three quarters of
the Directors comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Corporation, which is or would be subject to Rule 14a-11 of the
Regulation 14A promulgated under the Exchange Act) shall be, for purposes of the
Plan, considered as though such person were a member of the Incumbent Board. No
sale to underwriters or private placement of its capital stock by the
Corporation nor any acquisition by the Corporation, through merger, purchase of
assets or
<PAGE>
2
otherwise, effected in whole or in part by issuance or reissuance of shares of
its capital stock, shall constitute a Change of Control Event. For purposes of
the definition of "Change of Control Event", the following definitions shall be
applicable:
(i) The term "person" shall mean any individual, group,
corporation or other entity.
(ii) Any person shall be deemed to be the beneficial owner of
any shares of capital stock of the Corporation:
(A) which that person owns directly, whether or not
of record, or
(B) which that person has the right to acquire
pursuant to any agreement or understanding or upon exercise of
conversion rights, warrants, or options, or otherwise, or
(C) which are beneficially owned, directly or
indirectly (including shares deemed owned through application
of clause (B) above), by an "affiliate" or "associate" (as
defined in the rules of the Securities and Exchange Commission
under the Securities Act of 1933) of that person, or
(D) which are beneficially owned, directly or
indirectly (including shares deemed owned through application
of clause (B) above), by any other person with which that
person or such person's "affiliate" or "associate" (defined as
aforesaid) has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of
capital stock of the Corporation.
(iii) The outstanding shares of capital stock of the
Corporation shall include shares deemed owned through application of
clauses (ii)(B), (ii)(C) and (ii)(D) above, but shall not include any
other shares which may be issuable pursuant to any agreement or upon
exercise of conversion rights, warrants or options, or otherwise, but
which are not actually outstanding.
(c) "Change of Control Exercise Period" means the 60-day period
commencing upon the date of the first public disclosure of a Change of Control
Event.
(d) "Committee" means the Compensation Committee of the Board of
Directors.
(e) "Common Stock" or "Share" means common stock of the Corporation
which may be authorized but unissued, or issued and reacquired.
(f) "Derivative Security" has the meaning given it in Rule 16a-1(c)
under the Exchange Act.
<PAGE>
3
(g) "Director" means a member of the Board of Directors.
(h) "Employee" means a key employee of the Corporation or a Subsidiary.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, as of any date, the closing price for
one Share on the New York Stock Exchange Composite Tape or, if no sales of
Shares have taken place on such date, the closing price on the most recent date
on which selling prices were quoted. If the Shares are not listed or admitted to
trading on the New York Stock Exchange, the fair market value of the Shares
shall be the opening price of one Share on the principal national securities
exchange which the Shares are listed or admitted to trading, or, if the Shares
are not listed or admitted to trading on any national securities exchange, the
opening price of one Share as furnished by the National Association of
Securities Dealers, Inc. through the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or similar organization if NASDAQ is no
longer reporting that information. If the Shares are not quoted by any such
organization, the fair market value of the Shares shall be determined in good
faith by the Committee.
(k) "Grant" means an award made to a Participant pursuant to the Plan
and described in Paragraph 5, including, without limitation, an award of Stock
Options, Stock Appreciation Rights, Restricted Stock, Limited Stock Appreciation
Rights, Dividend Equivalent Rights, Performance Units, Performance Shares or
Other Stock-Based Grants or any combination of the foregoing.
(l) "Grant Agreement" means an agreement between the Corporation and a
Participant that sets forth the terms, conditions and limitations applicable to
a Grant.
(m) "Participant" means an Employee to whom one or more Grants have
been made and such Grants have not all been forfeited or terminated under the
Plan.
(n) "Stock-Based Grants" means the collective reference to the Grant of
Stock Appreciation Rights, Restricted Stock, Limited Stock Appreciation Rights,
Dividend Equivalent Rights, Performance Units, Performance Shares and Other
Stock-Based Grants.
(o) "Stock Options" means the collective reference to "Incentive Stock
Options" and "Other Stock Options".
(p) "Subsidiary" means any entity of which the Corporation owns, either
directly or indirectly, at least 50% of the combined voting power or economic
interest of such entity.
3. Administration of Plan
(a) The Plan shall be administered by the Committee. The Committee may
adopt its own rules of procedure, and the action of a majority of the Committee,
taken at a meeting or taken without a meeting by a writing signed by such
majority, shall constitute action by the
<PAGE>
4
Committee. The Committee shall have the power and authority to administer,
construe and interpret the Plan, to make rules for carrying it out and to make
changes in such rules. Any such interpretations, rules, and administration shall
be consistent with the purposes of the Plan.
(b) The Committee may delegate to the Chief Executive Officer and to
other senior officers of the Corporation its duties under the Plan subject to
such conditions and limitations as the Committee shall prescribe; provided,
however, that only the Committee may designate and make Grants to Participants
who are subject to Section 16 of the Exchange Act or Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"); and provided, further,
that the Committee may override any decisions made by such Chief Executive
Officer and other senior officers of the Corporation.
(c) The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Corporation, and the
officers and directors of the Corporation shall be entitled to rely upon the
advice, opinions or valuations of any such persons. No member of the Committee
shall be personally liable for any action, determination or interpretation made
in good faith with respect to the Plan or the Grants, and all members of the
Committee shall be fully protected by the Corporation with respect to any such
action, determination or interpretation.
(d) The Committee may construe and interpret the Plan and the Grants
awarded thereunder and establish, amend and revoke rules and regulations for the
administration of the Plan, including, but not limited to, correcting any defect
or supplying any omission, or reconciling any inconsistency in the Plan or in
any Grant Agreement, in the manner and to the extent it shall deem necessary or
advisable to make the Plan fully effective.
(e) The Committee may, in its absolute discretion, resolve all
questions relating to whether leaves of absence, transfers or other terminations
will constitute a termination of employment or service for purposes of the Plan.
(f) The Committee may (i) resolve all questions of interpretation
arising under or in connection with the administration of the Plan, (ii)
exercise its discretion with respect to the powers and rights granted to it as
set forth in the Plan and (iii) generally exercise such powers and perform such
acts as are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan.
(g) All decisions and determinations by the Committee in the exercise
of the powers conferred upon it under the Plan shall be final, binding and
conclusive upon the Company, the Subsidiaries, the Participants and all other
persons having any interest therein.
4. Eligibility
The Committee may from time to time make Grants under the Plan to
designated Employees, and in such form and having such terms, conditions and
limitations as the Committee may determine. Grants may be granted singly, in
combination or in tandem. The
<PAGE>
5
terms, conditions and limitations of each Grant under the Plan shall be (a) set
forth in a Grant Agreement, in a form approved by the Committee and (b)
consistent with the terms of the Plan; provided, however, such Grant Agreement
shall contain provisions dealing with the treatment of Grants in the event of
the termination, death or disability of a Participant, and may also include
provisions concerning the treatment of Grants in the event of a change of
control of the Corporation.
5. Grants
From time to time, the Committee shall determine the forms and amounts
of Grants to Participants. Grants shall be subject to such terms and conditions
as the Committee may in its sole discretion determine. Such terms and conditions
may include, without limitation, (a) vesting and exercisability periods or
restrictions and (b) the effect on a Grant of a termination or change in
employment status of a Participant (including a termination or change by reason
of a sale of a subsidiary or division of the Corporation). Such Grants may take
the following forms in the Committee's sole discretion:
(a) Incentive Stock Options. "Incentive Stock Options" are stock
options within the meaning of Section 422 of the Code to purchase Common Stock.
In addition to other restrictions contained in the Plan, an option granted under
this Paragraph 5(a): (i) may not be exercised more than 10 years after the date
it is granted, (ii) may not have an option price less than the Fair Market Value
of Common Stock on the date the option is granted, (iii) must otherwise comply
with Code Section 422 and (iv) must be designated as an "Incentive Stock Option"
by the Committee. The maximum aggregate Fair Market Value of Common Stock
(determined at the time of each Grant) with respect to which any Participant may
first exercise Incentive Stock Options under this Plan is $100,000. The maximum
aggregate Fair Market Value of any Incentive Stock Options granted to the
Participant for such year under any plans of the Corporation or any Subsidiary
in any calendar year is $100,000. Payment of the option price shall be made in
cash or in shares of Common Stock, or a combination thereof, in accordance with
the terms of the Plan, the Grant Agreement and any applicable guidelines of the
Committee in effect at the time.
(b) Other Stock Options. "Other Stock Options" are options to purchase
Common Stock which are not designated by the Committee as "Incentive Stock
Options". At the time of the Grant the Committee shall determine and shall have
contained in the Grant Agreement or other Plan rules: (i) the option exercise
period, (ii) the option price and (iii) such other conditions or restrictions on
the grant or exercise of the option as the Committee deems appropriate. In
addition to other restrictions contained in the Plan, an option granted under
this Paragraph 5(b): (i) may not be exercised more than ten years after the date
it is granted and (ii) may not have an option exercise price less than 50% of
the Fair Market Value of Common Stock on the date it is granted.
(c) Stock Appreciation Rights. "Stock Appreciation Rights" are rights
that on exercise entitle the holder to receive the excess of (i) the Fair Market
Value of a share of Common Stock on the date of exercise over (ii) the Fair
Market Value on the date of Grant, multiplied by (iii) the number of rights
exercised as determined by the Committee. Stock
<PAGE>
6
Appreciation Rights granted under the Plan may be, but need not be, granted in
conjunction with a Stock Option under Paragraph 5(a) or 5(b). The Committee, in
the Grant Agreement or by other Plan rules, may impose such conditions or
restrictions on the exercise of Stock Appreciation Rights as it deems
appropriate, and may terminate, amend, or suspend such Stock Appreciation Rights
at any time. No Stock Appreciation Right granted under this Plan may be
exercised more than ten years after the date it is granted.
(d) Restricted Stock. "Restricted Stock" is Common Stock delivered to a
Participant with restrictions or conditions on the Participant's right to
transfer or sell such stock. The number of shares of Restricted Stock and the
restrictions on such shares shall be as the Committee determines, in the Grant
Agreement or by other Plan rules, and the certificate for the Restricted Stock
shall bear evidence of the restrictions or conditions.
(e) Limited Stock Appreciation Rights. "Limited Stock Appreciation
Rights" are rights that, notwithstanding any other provision of the Plan, may
only be exercised during a Change of Control Exercise Period, and such Limited
Stock Appreciation Rights shall be so exercisable during the Change of Control
Exercise Period whether or not such person is then employed by the Corporation.
Upon exercise of a Limited Stock Appreciation Right, the holder thereof shall be
entitled to receive an amount in cash equal to the greater of (i) the excess of
(A) the Fair Market Value of the shares of the Common Stock with respect to
which the Limited Stock Appreciation Right was exercised over (B) the exercise
price of such shares under the Plan and (ii) if the Change of Control Event is
the result of a transaction or a series of transactions, the excess of (A) the
highest price per share of Common Stock paid in such transaction or transactions
during the Change of Control Exercise Period up to the date of exercise over (B)
the exercise price per share of Common Stock under the Plan. The Committee is
authorized to amend the terms of a Limited Stock Appreciation Right held by any
employee subject to Section 16 of the Exchange Act, as may be necessary so that
the holding and exercise of such Limited Stock Appreciation Right will be exempt
under such Section.
(f) Dividend Equivalent Rights. "Dividend Equivalent Rights" are rights
to receive cash payments from the Corporation at the same time and in the same
amount as any cash dividends paid on an equal number of shares of Common Stock
to shareholders of record during the period such rights are effective. The
Committee, in the Grant Agreement or by other Plan rules, may impose such
restrictions and conditions on the Dividend Equivalent Rights (including the
date on which such rights will terminate) as it deems appropriate, and the
Committee may terminate, amend, or suspend such Dividend Equivalent Rights at
any time.
(g) Performance Units. "Performance Units" are rights to receive, at a
specified future date, payment in cash of an amount equal to all or a portion of
the value of a unit granted by the Committee. At the time of the Grant, in the
Grant Agreement or by other Plan rules, the Committee shall determine (i) the
base value of the unit, (ii) the performance factors applicable to the
determination of the ultimate payment value of the unit and (iii) the period
over which Corporation performance will be measured. The performance factors
shall include a minimum performance standard for the Corporation below which no
payment will be made
<PAGE>
7
and a maximum performance level above which no increased payment will be made.
The term over which Corporation performance will be measured shall be not less
than six months.
(h) Performance Shares. "Performance Shares" are rights to receive, at
a specified future date, payment in cash or Common Stock (as determined by the
Committee) of an amount equal to all or a portion of the (i) average of the Fair
Market Value of a share of Common Stock on each trading day during the last
forty-five days of such period, multiplied by (ii) a specified number of shares
of Common Stock. At the time of the Grant, the Committee, in the Grant Agreement
or by Plan rules, shall determine (i) the factors which will govern the portion
of the rights so payable and (ii) the period over which performance will be
measured. The factors shall be based on Corporation performance and shall
include a minimum performance standard for the Corporation below which no
payment will be made and a maximum performance level above which no increased
payment will be made. The term over which Corporation performance will be
measured shall be not less than six months. Performance Shares shall be granted
for no consideration other than services.
(i) Other Stock-Based Grants. The Committee may make (i) other Grants
under the Plan pursuant to which shares of Common Stock (which may, but need
not, be shares of Restricted Stock pursuant to Paragraph 5(d)), are or may in
the future be acquired or (ii) Grants denominated in stock units, including
Grants valued using measures other than market value ("Other Stock-Based
Grants"). Other Stock-Based Grants may be granted with or without consideration;
provided, however, that the price of any such Grant made for consideration other
than services that provides for the acquisition of shares of Common Stock or
other equity securities of the Corporation may not be less than 50% of the Fair
Market Value of a share of the Common Stock or such other equity securities on
the date of grant of such Grant. Such Other Stock-Based Grants may be made
alone, in addition to or in tandem with any Grant of any type made under the
Plan and shall be consistent with the purposes of the Plan.
(j) Manner of Exercise and Payment of Stock Options. A Stock Option, or
portion thereof, shall be exercised for whole shares of Common Stock by delivery
of a written notice of exercise to the Corporation and payment of the full
exercise price of the shares being purchased. A Participant may exercise a Stock
Option with respect to less than the full number of shares for which the Stock
Option may then be exercised. The price of Common Stock purchased pursuant to an
Option, or portion thereof, may be paid:
(i) in United States dollars in cash or by check, bank draft
or money order payable to the order of the Corporation,
(ii) through the delivery of shares of Common Stock (which the
Participant has held for at least six months prior to delivery of such
shares or which the Participant purchased on the open market and are
held by the Participant free and clear of all liens and encumbrances)
with an aggregate Fair Market Value on the date of exercise equal to
the exercise price,
<PAGE>
8
(iii) by delivery of an irrevocable notice of exercise to a
financial institution acceptable to the Corporation to deliver promptly
to the Corporation the portion of sale or loan proceeds sufficient to
pay the exercise price,
(iv) through the written election of the Participant to have
shares of Common Stock withheld by the Corporation from the shares
otherwise to be received, with such withheld shares having an aggregate
Fair Market Value on the date of exercise equal to (A) the exercise
price and (B) any Federal, state and local tax withholding obligations
in connection with such exercise or
(v) by any combination of the above methods of payment.
The Committee shall have sole discretion to reject an election for
delivering or withholding Common Stock upon exercise of a Stock Option in
accordance with clauses (ii) through (v) above and may impose such limitations
and prohibitions on the use of Common Stock to exercise a Stock Option as it
deems appropriate, including, without limitation, any limitation or prohibition
designed to avoid certain accounting consequences which may result from the use
of Common Stock as payment upon exercise of a Stock Option or tax withholding
obligation. If the method of payment in clause (iii) is elected, the Stock
Option shall be deemed to be exercised simultaneously with the sale of the
shares by the financial institution. If the shares to be acquired on such
exercise cannot be sold for a price equal to or greater than the full Exercise
Price, then there shall be no exercise of the Stock Option.
(k) Nontransferability of Derivative Securities. Unless otherwise
permitted by the Committee (provided that such action by the Committee does not
violate applicable laws), no Stock Option or Stock-Based Grant which constitutes
a Derivative Security shall be (i) transferable otherwise than by will, the laws
of descent and distribution or pursuant to beneficiary designation procedures
approved by the Corporation or (ii) subject to attachment, execution or other
similar process. In the event of any attempt by the Participant to alienate,
assign, pledge, hypothecate or otherwise dispose of a Stock Option or any such
Stock-Based Grant or of any right hereunder, except as provided for herein, or
in the event of any levy or any attachment, execution or similar process upon
the rights or interest hereby conferred, the Stock Option or such Stock-Based
Grant shall thereupon become null and void. Notwithstanding the foregoing, the
Committee may provide, either at the time of grant or otherwise, that a Stock
Option or Stock-Based Grant constituting a Derivative Security is transferrable
to the extent that such transferability is permissible under both (i) Rule 16b-3
under the Exchange Act of 1934 and (ii) the form of Registration Statement under
which securities issued under the Plan are registered under the Securities Act
of 1933.
6. Limitations and Conditions
(a) Subject to Paragraphs 4 and 8, the number of shares available for
Grants under this Plan shall be 2,505,000 shares of Common Stock (giving effect
to the additional authorization of shares approved by the Compensation Committee
of the Board of Directors on December 4, 1996), reduced by the sum of the
aggregate amount of shares that are issued upon a Grant or that become subject
to an outstanding Grant. To the extent that shares related
<PAGE>
9
to outstanding Grants are not issued by reason of Grants being (i) forfeited,
(ii) terminated, (iii) canceled, (iv) expired unexercised or (v) delivered or
withheld to pay the exercise price or satisfy withholding obligations, then such
shares shall again immediately become available for Grants.
(b) No Grants shall be made under the Plan beyond ten years after the
effective date of the Plan, but the terms of Grants made on or before the
expiration thereof may extend beyond such expiration. At the time a Grant is
made or amended or the terms or conditions of a Grant are changed, the Committee
may provide for limitations or conditions on such Grant.
(c) Nothing contained herein shall affect the right of the Corporation
to terminate any Participant's employment at any time or for any reason.
(d) Deferrals of Grant payouts may be provided for, at the sole
discretion of the Committee, in the Grant Agreements.
(e) Except as otherwise prescribed by the Committee, the amounts of the
Grants for any employee of a Subsidiary (along with interest, dividend, and
other expenses accrued on deferred Grants) shall be charged to the Participant's
employer during the period for which the Grant is made. If the Participant is
employed by more than one of either (i) the Corporation or (ii) a Subsidiary
during the period for which the Grant is made, the Participant's Grant and
related expenses will be allocated between the companies employing the
Participant in a manner prescribed by the Committee.
(f) Participants shall not be, and shall not have any of the rights or
privileges of, stockholders of the Corporation in respect of any Shares subject
to any Grant unless and until certificates representing any such Shares have
been issued by the Corporation to such Participants.
(g) No election as to benefits or exercise of any Grant may be made
during a Participant's lifetime by anyone other than the Participant, except by
a legal representative appointed for or by the Participant.
(h) Any Grant shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Corporation
or its Subsidiaries, and shall not affect any benefits under any other benefit
plan of any kind or subsequently in effect under which the availability or
amount of benefits is related to level of compensation. This Plan is not a
"Retirement Plan" or "Welfare Plan" under the Employee Retirement Income
Security Act of 1974, as amended.
(i) Unless the Committee determines otherwise, no benefit or promise
under the Plan shall be secured by any specific assets of the Corporation or its
Subsidiaries, nor shall any assets of the Corporation or its Subsidiaries be
designated as attributable or allocated to the satisfaction of the Corporation's
obligations under the Plan.
<PAGE>
10
(j) No more than 200,000 stock options or stock appreciation rights may
be awarded to any employee of the Company or its subsidiaries during any
calendar year under the Plan.
7. Transfers and Leaves of Absence
Subject to Paragraph 3(e) above, for purposes of the Plan, a transfer
of a Participant's employment without an intervening period of separation among
the Corporation and any Subsidiary shall not be deemed a termination of
employment.
8. Adjustments
In the event of a stock split, spin-off, stock dividend, stock
combination, stock reclassification, recapitalization, merger, change of control
or similar event, the Committee may adjust appropriately (a) the number of
Shares subject to the Plan, (b) the number of Shares available for or covered by
Grants and (c) Share prices related to outstanding Grants. The Committee may
also make such other revisions to outstanding Grants as it deems are equitably
required.
9. Merger, Consolidation, Exchange, Acquisition, Liquidation or Dissolution
In its absolute discretion, and on such terms and conditions as it
deems appropriate, coincident with or after the grant of any Stock Option or any
Stock-Based Grant, the Committee may provide that such Stock Option or
Stock-Based Grant cannot be exercised after (a) the merger or consolidation of
the Corporation into another corporation, (b) the exchange of all or
substantially all of the assets of the Corporation for the securities of another
corporation, (c) the acquisition by another corporation of 80% or more of the
Corporation's then outstanding shares of voting stock or (d) the
recapitalization, reclassification, liquidation or dissolution of the
Corporation. If the Committee provides for the foregoing exercise limitations,
it shall, in its absolute discretion and on such terms and conditions as it
deems appropriate, also provide, either by the terms of such Stock Option or
Stock-Based Grant or by a resolution adopted prior to the occurrence of such
merger, consolidation, exchange, acquisition, recapitalization,
reclassification, liquidation or dissolution, that, for some period of time
prior to such event, such Stock Option or Stock-Based Grant shall be exercisable
as to all shares subject thereto, notwithstanding anything to the contrary
herein (but subject to the provisions of Paragraph 6(b)) and that, upon the
occurrence of such event, such Stock Option or Stock-Based Grant shall terminate
and be of no further force or effect; provided, however, that the Committee may
also provide, in its absolute discretion, that even if the Stock Option or
Stock-Based Grant shall remain exercisable after any such event, from and after
such event, any such Stock Option or Stock-Based Grant shall be exercisable only
for the kind and amount of securities and/or other property, or the cash
equivalent thereof, receivable as a result of such event by the holder of a
number of shares of stock for which such Stock Option or Stock-Based Grant
could have been exercised immediately prior to such event.
10. Amendment and Termination
<PAGE>
11
The Committee shall have the authority to make such amendments to any
terms and conditions applicable to outstanding Grants as are consistent with
this Plan; provided, however, that except for adjustments under Paragraph 8 or 9
hereof, no such action shall modify such Grant in a manner that is materially
adverse to the Participant without the Participant's consent (except to the
degree that such modification is provided for or contemplated in the terms of
the Grant). The Committee's authority hereunder shall include, without
limitation, amendments to (a) accelerate or waive vesting periods and (b) to
extend the exercisability (including to extend or provide for post-termination
exercisability) of Stock Options or Stock-Based Grants, provided that such
exercisability shall not extend past ten years from the date of grant of such
Stock Options, Stock-Based Grants or Other Stock-Based Grants.
The Board of Directors may amend, suspend or terminate the Plan, except
that no such action, other than an action under Paragraph 8 or 9 hereof, may be
taken which would, without shareholder approval, result in the loss of an
exemption under Section 16 of the Exchange Act (or the rules promulgated in
connection therewith).
11. Foreign Grants
The Committee may make Grants to Employees who are subject to the laws
of nations other than the United States, whose Grants may have terms and
conditions that differ from the terms thereof as provided elsewhere in the Plan
for the purpose of complying with such foreign laws.
12. Withholding Taxes
The Corporation shall have the right to deduct from any payment made
under the Plan any Federal, state or local income or other taxes required by law
to be withheld with respect to such payment at the highest marginal individual
income tax rate. It shall be a condition to the obligation of the Corporation to
deliver shares or pay any cash pursuant to any Grant that the Participant pay to
the Corporation such amount as may be requested by the Corporation for the
purpose of satisfying any liability for such withholding taxes. Any Grant
Agreement may provide that the Participant may elect, in accordance with any
conditions set forth in such Grant Agreement, to pay a portion or all of such
withholding taxes by (a) delivery of in shares of Common Stock or (b) having
shares of Common Stock withheld by the Corporation from the shares otherwise to
be received. The number of shares so delivered or withheld shall have an
aggregate Fair Market Value sufficient to satisfy the applicable withholding
taxes. The acceptance of any such election by a Participant shall be at the sole
discretion of the Committee, and, in the case of a Participant subject to
Section 16 of the Exchange Act, the Corporation may require that the method of
making such payment be in compliance with Section 16 and the rules and
regulations thereunder.
<PAGE>
12
13. Effective Date and Termination Dates
The Plan (a) shall be effective as of November 15, 1995, subject to
approval by the stockholders of the Corporation and (b) shall terminate ten
years later, subject to earlier termination by the Board of Directors pursuant
to Paragraph 10.
<PAGE>
PROXY PROXY
CAPMAC HOLDINGS INC.
Solicited by the Board of Directors for the Annual Meeting of Stockholders
May 7, 1997
The undersigned Stockholder of CapMAC Holdings Inc. hereby appoints Ram
D. Wertheim and Paul V. Palmer, and each of them, with power of substitution, to
vote at the Annual Meeting of Stockholders of the Company to be held at the
Business Conference Center, 780 Third Avenue, New York, New York, on Wednesday,
May 7, 1997 at 9:00 a.m., or at any postponement or adjournment thereof, on the
following matters described on the reverse side.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
(Continued and to be signed on reverse side.)
- - --------------------------------------------------------------------------------
<PAGE>
The Board of Directors Recommends a Vote a FOR All Nominees and FOR Item 2.
1. ELECTION OF DIRECTORS -- For Withhold For All
For three year terms expiring in 2000 -- All All Except
Nominees: George M. Jenkins, Robert Model, |_| |_| |_|
Doren W. Russler, John T. Shea and Richard
C. Yancey.
____________________________________________
(Except nominee(s) written above)
2. PROPOSAL TO RATIFY the selection of KPMG Peat For Against Abstain
Marwick LLP as the independent accountants for |_| |_| |_|
the Company and its subsidiaries for the fiscal
year ending December 31, 1997.
3. Proposal to approve certain amendements to the
CapMAC Holdings Inc. 1995 Omnibus Stock Incentive
Plan, including an amendment to increase the |_| |_| |_|
number of shares of Common Stock, par value $.01
per share, reserved for grants thereunder.
4. In the discretion of the proxies, the transaction of such other business
which may properly come before the meeting, all as described in the Notice
of 1997 Annual Meeting of Stockholders.
The Shares Represented By This Proxy Will Be Voted As Directed on Items 1, 2,
and 3, But Where No Direction is Indicated Will Be Voted FOR Items 1, 2, and 3.
Dated: ____________________________, 1997
Signature(s)____________________________________________________________________
________________________________________________________________________________
Important: Please sign exactly as name appears herein. 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 full corporate name by the President or other
authorized oficer. If a partnership, please sign in partnership name by an
authorized person.
- - --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
