<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
DUFF & PHELPS CREDIT RATING CO.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
DUFF & PHELPS CREDIT RATING CO.
55 EAST MONROE STREET
CHICAGO, ILLINOIS 60603
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 1997
---------------------
To the Shareholders of
DUFF & PHELPS CREDIT RATING CO.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Duff &
Phelps Credit Rating Co. (the "Company") will be held at The Palmer House Hotel,
17 East Monroe Street, Chicago, Illinois 60690, on Tuesday, May 13, 1997, at
9:30 a.m., for the purpose of considering and acting upon the following matters:
1. To elect five directors to serve until the next annual meeting of
shareholders and until their successors are duly elected and qualified;
and
2. To consider and act upon such other business as may properly come before
the meeting or any adjournments thereof.
Shareholders of record as of the close of business on March 21, 1997 shall
be entitled to notice of and to vote at the meeting. The transfer books will not
be closed. For ten days prior to the meeting, a list of shareholders entitled to
vote at the meeting will be open to the examination of any shareholder, for any
purpose germane to the meeting, during ordinary business hours, at the offices
of Duff & Phelps Credit Rating Co., 55 East Monroe Street, Chicago, Illinois
60603. Shareholders who do not expect to attend the meeting in person are urged
to execute and return the accompanying proxy in the envelope enclosed.
By order of the Board of Directors
Marie C. Becker,
SECRETARY
Chicago, Illinois
March 28, 1997
<PAGE>
PROXY STATEMENT
DUFF & PHELPS CREDIT RATING CO.
ANNUAL MEETING OF SHAREHOLDERS
MAY 13, 1997
------------------------
GENERAL INFORMATION
This proxy statement is being furnished to the shareholders of Duff & Phelps
Credit Rating Co., an Illinois corporation (the "Company"), 55 East Monroe
Street, Chicago, Illinois 60603, in connection with the solicitation of proxies
by its Board of Directors for use at the annual meeting of shareholders to be
held on Tuesday, May 13, 1997 and at any adjournments thereof. The approximate
date on which this proxy statement and the accompanying proxy are first being
sent to shareholders is March 28, 1997.
The proxy is revocable at any time before it is voted by a subsequently
dated proxy, by written notification to the persons named therein as proxies,
which may be mailed or delivered to the Company at the above address, or by
attendance at the meeting and voting in person. All shares represented by
effective proxies will be voted at the meeting and at any adjournments thereof.
If the enclosed proxy is properly executed and returned in time for voting
with a choice specified thereon, the shares represented thereby will be voted as
indicated thereon. If no specification is made, the proxy will be voted by the
proxy committee for the election as directors of the nominees named below (or
substitutes therefor, if any nominees are unable or refuse to serve) and in its
discretion upon such matters not presently known or determined which may
properly come before the meeting.
The Company has one class of stock outstanding, Common Stock, without par
value ("Common Stock"). On March 21, 1997, 5,084,416 shares of Common Stock were
outstanding and entitled to one vote each on all matters to be considered at the
meeting. Shareholders of record as of the close of business on March 21, 1997
are entitled to notice of and to vote at the meeting. There are no cumulative
voting rights with respect to the election of directors.
Inspectors of election will be appointed to tabulate the number of shares of
Common Stock represented at the meeting in person or by proxy, to determine
whether or not a quorum is present and to count all votes cast at the meeting.
The inspectors of election will treat abstentions and broker non-votes as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum. With respect to the tabulation of votes cast on a specific proposal
presented to the shareholders at the meeting, abstentions will be considered as
present and entitled to vote with respect to that specific proposal, whereas
broker non-votes will not be considered as present and entitled to vote with
respect to that specific proposal.
<PAGE>
PRINCIPAL HOLDERS OF COMMON STOCK
The following table shows with respect to each person who is known to be the
beneficial owner of more than 5% of the Common Stock of the Company: (i) the
total number of shares of Common Stock beneficially owned as of March 21, 1997;
and (ii) the percent of the Common Stock so owned as of that date:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF COMMON
BENEFICIAL OWNER OWNERSHIP(1) STOCK
- - ---------------------------------------------------- ---------------------- -------------------
<S> <C> <C>
The Kaufmann Fund, Inc. ............................ 478,966(2) 9.4%
140 East 45th Street, 43rd Floor
New York, New York 10017
Mellon Bank Corporation ............................ 420,000(3) 8.3
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Quest Advisory Corp. ............................... 319,032(4) 6.3
1414 Avenue of the Americas
New York, New York 10019
RH Capital Associates .............................. 275,100(5) 5.4
55 Harristown Road
Glen Rock, New Jersey 07452
</TABLE>
The following table shows with respect to each director and nominee for
director of the Company, the executive officers of the Company named in the
Executive Compensation Table, and all directors and executive officers as a
group, seven in number: (i) the total number of shares of Common Stock
beneficially owned as of March 21, 1997; and (ii) the percent of the Common
Stock so owned as of that date:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF COMMON
NAME OF BENEFICIAL OWNER OWNERSHIP(1) STOCK
- - ---------------------------------------------------- ---------------------- -------------------
<S> <C> <C>
Paul J. McCarthy(6)................................. 140,270 2.7%
Philip T. Maffei(6)................................. 73,931 1.4
Milton L. Meigs(6)(7)............................... 85,800 1.7
Jonathan Ingham(6).................................. 12,500 *
Donald J. Herdrich(6)............................... 5,000 *
Ernest T. Elsner(6)................................. 74,825 1.5
Peter J. Stahl(6)(8)................................ 69,416 1.3
All directors and executive officers as a group (7
persons)(6)......................................... 461,742 8.8%
</TABLE>
- - ------------------------
* Less than one percent.
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of 1934.
Unless otherwise stated below, each such person has sole voting and
investment power with respect to all such shares. Under Rule 13d-3(d),
shares not outstanding which are subject to options, warrants, rights or
conversion
2
<PAGE>
privileges exercisable within 60 days are deemed outstanding for the purpose
of calculating the number and percentage owned by such person, but are not
deemed outstanding for the purpose of calculating the percentage owned by
each other person listed.
(2) Number of shares reported in the most recent Schedule 13G filed by The
Kaufmann Fund, Inc. with the Securities and Exchange Commission.
(3) Number of shares reported in the most recent Schedule 13G filed by Mellon
Bank Corporation ("Mellon Bank") with the Securities and Exchange
Commission. These securities are beneficially owned by Mellon Bank and
direct or indirect subsidiaries in their various fiduciary capacities.
Includes 420,000 shares as to which Mellon Bank has sole voting power,
17,000 shares as to which Mellon Bank has sole dispositive power and 404,000
shares as to which Mellon Bank has shared dispositive power.
(4) Number of shares reported in the most recent Schedule 13G filed by Quest
Advisory Corp. with the Securities and Exchange Commission.
(5) Number of shares reported in the most recent Schedule 13G filed by RH
Capital Associates ("RH Capital") with the Securities and Exchange
Commission. Includes 275,100 shares as to which RH Capital has shared voting
and dispositive power.
(6) Includes shares of Common Stock which could be acquired through the exercise
of stock options as follows: Mr. McCarthy, 73,603 shares; Mr. Maffei, 42,834
shares; Mr. Meigs, 41,820 shares; Mr. Ingham, 12,500 shares; Mr. Herdrich,
5,000 shares; Mr. Elsner, 40,732 shares; Mr. Stahl, 30,516 shares; and all
directors and executive officers as a group, 247,005 shares.
(7) Includes 80 shares owned by Mr. Meigs' wife. Mr. Meigs disclaims beneficial
ownership of such shares.
(8) Includes 1,000 shares owned by Mr. Stahl's wife. Mr. Stahl disclaims
beneficial ownership of such shares.
ELECTION OF DIRECTORS
NOMINEES AND DIRECTORS
At the meeting, five directors are to be elected to hold office until the
next annual meeting of shareholders and until their successors are duly elected
and qualified. All of the nominees are presently directors of the Company. The
affirmative vote of the holders of a plurality of the shares of Common Stock
represented in person or by proxy at the annual meeting is required to elect
directors. It is intended that, in the absence of contrary specifications, votes
will be cast pursuant to the enclosed proxies for the election of such nominees.
Should any of the nominees become unable or unwilling to accept nomination or
election, it is intended, in the absence of contrary specifications, that the
proxies will be voted for the balance of those named and for a substitute
nominee or nominees. However, the Company now knows of no reason to anticipate
such an occurrence. All of the nominees have consented to be named as nominees
and to serve as directors if elected.
The following persons are nominees for election as directors of the Company:
PAUL J. MCCARTHY Age - 58 Director since -- 1991
Mr. McCarthy has been Chairman of the Board of the Company since December
1995 and Chief Executive Officer of the Company since February 1991. He has also
been Chief Financial Officer of the
3
<PAGE>
Company since November 1994. Mr. McCarthy was also President of the Company from
February 1991 to December 1995. Mr. McCarthy was also an Executive Vice
President and a Director of Duff & Phelps Corporation ("D&P") from January 1992
to November 1994 and an Executive Vice President and a Director of Duff & Phelps
Inc. from February 1991 until its dissolution in November 1992. From May 1975 to
February 1991, he served as President, Chief Executive Officer and a Director of
McCarthy, Crisanti & Maffei, Inc., the investment research operations of which
were acquired by D&P in February 1991.
PHILIP T. MAFFEI Age - 53 Director since -- 1991
Mr. Maffei has been President of the Company since December 1995 and Chief
Operating Officer of the Company since October 1994. From February 1991 to
December 1995, Mr. Maffei was an Executive Vice President of the Company. From
May 1975 to February 1991, he served as an Executive Vice President, Treasurer
and a Director of McCarthy, Crisanti and Maffei, Inc., the investment research
operations of which were acquired by D&P in February 1991.
MILTON L. MEIGS Age - 64 Director since -- 1991
Mr. Meigs is presently retired. Mr. Meigs was an Executive Vice President of
the Company from February 1991 to December 31, 1994. From December 1987 to
February 1991, Mr. Meigs was a Group Vice President of the Company.
JONATHAN INGHAM Age - 55 Director since -- 1994
Mr. Ingham has been President and Chief Executive Officer of Ingham
Industries Inc. (DBA Auth Chimes), a manufacturer of door chimes, since August
1989.
DONALD J. HERDRICH Age - 54 Director since -- 1995
Mr. Herdrich is presently a private investor. From 1987 to 1989, Mr.
Herdrich was Founding Partner of Stonebridge Partners, and from 1978 to 1986 Mr.
Herdrich was employed by Kohlberg Kravis Roberts & Co.
THE BOARD OF DIRECTORS
The business and affairs of the Company are managed under the direction of
the Board of Directors. The Board has responsibility for establishing broad
corporate policies and for evaluating the overall performance of the Company.
Members of the Board are kept informed of the Company's business by various
reports and documents sent to them, as well as by reports presented at meetings
of the Board and its committees. During 1996, the Board of Directors met four
times and acted by written consent one time. All directors attended 100% of the
meetings of the Board of Directors and the committees on which he served.
BOARD COMMITTEES
The Board of Directors has three standing committees, the Executive
Committee, the Audit Committee and the Compensation Committee.
The Executive Committee is empowered to exercise the authority of the Board
of Directors in the management of the business and affairs of the Company
between meetings of the Board of Directors,
4
<PAGE>
except as such authority may be limited by the provisions of the Illinois
Business Corporation Act. The Executive Committee, which is composed of Messrs.
McCarthy (Chairman) and Maffei, meets informally from time to time.
The Audit Committee recommends to the Board of Directors the appointment of
the independent public accountants for the following year. The Audit Committee
also reviews the scope of the annual audit, the annual financial statements of
the Company and the auditor's report thereon and the auditor's comments relative
to the adequacy of the Company's system of internal controls and accounting
systems. During 1996, the Audit Committee was composed of Messrs. Herdrich
(Chairman) and Ingham. In February 1997, Mr. Meigs was also appointed to the
Audit Committee. The Audit Committee met one time during 1996.
The Compensation Committee reviews management compensation levels and
provides recommendations regarding salaries and other compensation for the
Company's officers, including bonuses, grants of stock options and other
incentive programs. The Compensation Committee serves as the committee that
administers the Company's 1994 Long-Term Stock Incentive Plan. During 1996, the
Compensation Committee was composed of Messrs. Ingham (Chairman) and Herdrich.
In February 1997, Mr. Meigs was also appointed to the Compensation Committee.
The Compensation Committee met three times during 1996.
The Company does not have a standing nominating committee of the Board of
Directors. This function is performed by the Board of Directors. The Company's
Bylaws establish procedures, including advance notice procedures, with regard to
the nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors. In general, notice must be received by the
Company at its principal executive offices not less than 60 days nor more than
90 days prior to meetings of shareholders of the Company. Such notice must set
forth all information with respect to each such nominee as required by the
federal proxy rules. Such notice must be accompanied by a signed statement of
such nominee consenting to be a nominee and a director, if elected.
5
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Board of Directors is responsible for
establishing, administering and evaluating the Company's policies regarding the
compensation of its executive officers. The Company's compensation policies are
intended to align executive compensation with the business objectives and
performance of the Company. Additionally, the Company's compensation policies
are designed to permit the Company to attract, retain and motivate executive
officers to ensure the long-term success of the Company.
The compensation of executive officers is composed of three components:
salary, annual incentive compensation and long-term incentive compensation. The
Compensation Committee considers the total compensation of each executive
officer in establishing each element of his or her compensation. The
compensation of the Company's Chief Executive Officer is subject to the same
policies that are applicable to all executive officers of the Company.
SALARY
In establishing the annual salaries of each of the Company's executive
officers, the Compensation Committee considers the responsibilities, abilities
and industriousness of the executive officer and the Company's performance. The
salaries of the Company's executive officers are reviewed annually.
ANNUAL INCENTIVE COMPENSATION
The Company maintained two annual incentive compensation plans in 1996: the
Incentive Compensation Plan and the Executive Management Incentive Compensation
Plan. Incentive compensation under both plans was variable and closely tied to
corporate and individual performance in a manner that encouraged a continuous
focus on providing top-quality service to clients, increasing productivity and
obtaining new business opportunities in order to increase profitability and
shareholder value.
INCENTIVE COMPENSATION PLAN. The Company has maintained the Incentive
Compensation Plan for several years. Pursuant to the Incentive Compensation
Plan, cash bonuses have been awarded annually to officers and a limited number
of other key employees of the Company, including executive officers, based on
operating income (before depreciation, amortization, incentive compensation and
name use fees) and a performance assessment of the participant. Approximately
70% of the Company's professional staff participated in the Incentive
Compensation Plan during 1996. (The professional staff is all employees other
than secretarial and similar support staff.) The Compensation Committee reviewed
awards under the Incentive Compensation Plan, subject to approval of such awards
by the Board of Directors.
At the beginning of 1996, a target incentive fund was established based on
an operating income goal (before depreciation, amortization, incentive
compensation and name use fees) for the Company. After the results of operations
for the year were known, the incentive fund was adjusted by a percentage of the
variance of the actual operating income (before depreciation, amortization,
incentive compensation and name use fees) from the operating income goal (before
depreciation, amortization, incentive compensation and name use fees)
established at the beginning of the year.
6
<PAGE>
The persons entitled to receive a bonus under the Incentive Compensation
Plan and the amounts awarded were determined as a result of a process involving
a recommendation by the Executive Committee, based on a formalized performance
assessment, and review and final approval by the Compensation Committee of the
Board of Directors.
EXECUTIVE MANAGEMENT INCENTIVE COMPENSATION PLAN. Under the Executive
Management Incentive Compensation Plan, cash bonuses have been awarded annually
to the executive officers of the Company based on the operating income (before
depreciation, amortization, incentive compensation and name use fees) of the
Company. The plan and awards have been reviewed and approved annually by the
Compensation Committee of the Board of Directors.
At the beginning of 1996, a target bonus was established based on the
operating income goal (before depreciation, amortization, incentive compensation
and name use fees) for the Company. Adjustments to the target bonus were also
specified based on variances of the actual operating income (before
depreciation, amortization, incentive compensation and name use fees) from the
established operating income goal (before depreciation, amortization, incentive
compensation and name use fees).
LONG-TERM INCENTIVE COMPENSATION
Pursuant to the Company's 1994 Long-Term Stock Incentive Plan, key employees
of the Company, including executive officers, are eligible to receive long-term
incentives in a variety of forms including stock options, stock appreciation
rights, restricted stock, phantom stock and other stock based awards. The
purpose of the Stock Incentive Plan is to enable the Company to attract and
retain the best available executive personnel and other key employees, to
provide for the Company's long-term growth and business success and to provide
an incentive for such employees to exert their best efforts on behalf of the
Company and its shareholders. The Compensation Committee believes that the grant
of awards whose value is related to the value of the Company's Common Stock
aligns the interests of shareholders and employees who receive awards. The Stock
Incentive Plan is administered by the Compensation Committee.
The Compensation Committee determines the individuals to whom awards are
granted, the type and amount of awards to be granted, the time of all such
grants and the terms, conditions and provisions of such awards and the
restrictions related thereto. In making awards under the Stock Incentive Plan,
the Compensation Committee considers the recommendations of the Executive
Committee, the responsibilities of each grantee, his past performance and his
anticipated future contribution to the Company.
During 1996, only stock options were granted under the Stock Incentive Plan.
The Compensation Committee believes that the grant of stock options provides a
strong incentive for employees to increase shareholder value over the long term
because the full benefit of such awards cannot be realized unless the value of
the Company's Common Stock appreciates over a specified number of years.
Approximately 74% of the officers of the Company received options in 1996. The
exercise price of options granted in 1996 was equal to the fair market value per
share of Common Stock on the date of grant. One-third of each option grant vests
on the first, second and third anniversaries of the date of grant and such
options expire ten years after the date of grant.
Amendments adopted in 1993 to the Internal Revenue Code limit the
deductibility for federal income tax purposes of certain compensation payable to
top executive officers of publicly held corporations. Certain types of
compensation are excluded from the limitations. The Company believes that the
limitations are not applicable to stock options granted under the Stock
Incentive Plan or to awards under the Incentive Compensation Plan or the
Executive Management Incentive Compensation Plan.
7
<PAGE>
The salary, annual incentive compensation and long-term incentive
compensation paid by the Company in 1996 to the Chief Executive Officer and the
other three people serving as executive officers of the Company at December 31,
1996 is set forth in the tables that follow this Report. The Compensation
Committee believes that the executive officers of the Company are dedicated to
increasing profitability and shareholder value and that the compensation
policies that the Compensation Committee has established and administered
contribute to this focus.
THE COMPENSATION COMMITTEE
Jonathan Ingham (Chairman)
Donald J. Herdrich
Milton L. Meigs
The foregoing Report of the Compensation Committee on Executive Compensation
shall not be deemed to be incorporated by reference into any filing of the
Company under the Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent that the Company specifically incorporates such information
by reference.
8
<PAGE>
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION TABLE
The following table sets forth certain information regarding the
compensation paid or accrued by the Company to or for the account of the Chief
Executive Officer and each of the other three people serving as executive
officers of the Company at December 31, 1996 for services rendered in all
capacities during each of the Company's fiscal years ended December 31, 1996,
1995 and 1994:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
--------------
ANNUAL COMPENSATION SECURITIES
------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS (#) COMPENSATION(3)
- - ------------------------------- ---- ---------- ---------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Paul J. McCarthy,.............. 1996 $ 365,000 $ 762,772 18,000(2) $ 8,325
Chairman of the Board 1995 348,000 604,000 18,000(2) 7,886
and Chief Executive 1994 331,008 420,600 54,000(2) 7,507
Officer
Philip T. Maffei,.............. 1996 250,000 622,772 15,000(2) 6,397
President and Chief 1995 236,000 454,000 14,000(2) 6,165
Operating Officer 1994 225,000 257,500 42,000(2) 5,982
Ernest T. Elsner,.............. 1996 189,000 283,280 10,000(2) 7,300
Executive Vice President 1995 180,000 215,000 8,000(2) 6,958
1994 171,000 254,500 30,000(2) 6,653
Peter J. Stahl,................ 1996 142,000 434,612 10,000(2) 5,481
Executive Vice President 1995 132,000 361,336 10,000(2) 5,472
1994 125,000 267,026 30,000(2) 5,225
</TABLE>
- - ------------------------
(1) The Company maintains an Incentive Compensation Plan pursuant to which cash
bonuses are awarded annually to officers and other key employees of the
Company based on operating income (before depreciation, amortization,
incentive compensation and name use fees) and a performance assessment of
the participant. The Company also maintains an Executive Management
Incentive Compensation Plan pursuant to which cash bonuses are awarded
annually to the executive officers of the Company based on operating income
(before depreciation, amortization, incentive compensation and name use
fees) of the Company. The Company also maintains a commission plan based on
specific performance criteria for an executive officer.
(2) Number of shares of Common Stock subject to options granted during 1996,
1995 and 1994 under the Company's 1994 Long-Term Stock Incentive Plan.
Excludes options granted in connection with the distribution of the
outstanding shares of Common Stock of the Company to the stockholders of D&P
in October 1994. In connection with the distribution in 1994, an option to
purchase shares of Common Stock of the Company was granted to each holder of
an option to purchase common stock of D&P at a ratio of an option for one
share of Common Stock of the Company for each three shares of common stock
of D&P subject to an outstanding option. The compensation related to these
options was recognized in the year of the original option grant by D&P.
9
<PAGE>
(3) Consists of matching contributions made by the Company pursuant to the
Company's Savings Plan and life insurance premiums paid by the Company on
behalf of each executive officer. For 1996, life insurance premiums in the
following amounts were paid by the Company: Mr. McCarthy, $3,825; Mr.
Maffei, $1,897; Mr. Elsner, $2,800; and Mr. Stahl, $981.
EMPLOYEE STOCK OPTIONS
OPTION GRANTS. The following table sets forth certain information regarding
options to purchase shares of Common Stock granted as incentive compensation to
the executive officers of the Company named in the Executive Compensation Table
during the Company's 1996 fiscal year:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE GRANT DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR ($/SH)(2) DATE ($)(3)
- - --------------------------- ------------ ------------ ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Paul J. McCarthy........... November
18,000 8.9% $22.625 7, 2006 $122,066
Philip T. Maffei........... November
15,000 7.4 22.625 7, 2006 149,435
Ernest T. Elsner........... November
10,000 4.9 22.625 7, 2006 99,623
Peter J. Stahl............. November
10,000 4.9 22.625 7, 2006 99,623
</TABLE>
- - ------------------------
(1) All options were granted on November 7, 1996 under the Company's 1994
Long-Term Stock Incentive Plan. All options are non-qualified stock options.
Beginning November 7, 1997, annually, upon the anniversary of the date of
grant of the options, one-third of the options granted become vested and
exercisable, until the third anniversary of the date of grant, whereupon all
of the options granted are vested and exercisable.
(2) The option exercise price is equal to the fair market value per share of
Common Stock on the date of grant.
(3) Calculated pursuant to the Black-Scholes option pricing model. Assumes with
respect to Mr. McCarthy expected volatility of 12%, risk-free rate of return
of 6.2%, dividend yield of .5%, time of exercise of six years and no risk of
forfeiture. Assumes with respect to Messrs. Maffei, Elsner and Stahl
expected volatility of 12%, risk-free rate of return of 6.4%, dividend yield
of .5%, time of exercise of ten years and no risk of forfeiture.
OPTION EXERCISES. The following table sets forth certain information
regarding options to purchase shares of Common Stock exercised during the
Company's 1996 fiscal year and the number and value of
10
<PAGE>
unexercised options to purchase shares of Common Stock held at the end of the
Company's 1996 fiscal year by the executive officers of the Company named in the
Executive Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS
FISCAL YEAR END AT FISCAL YEAR END
NUMBER OF (#) ($)(2)
SHARES VALUE ---------------- ------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
- - --------------------------- ------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C>
Paul J. McCarthy........... 0 $0 73,603/48,000 $1,123,753/416,250
Philip T. Maffei........... 0 0 42,834/38,333 591,657/325,250
Ernest T. Elsner........... 0 0 40,732/25,333 627,085/218,250
Peter J. Stahl............. 0 0 30,246/26,937 419,427/237,175
</TABLE>
- - ------------------------
(1) Value realized is equal to the difference between the fair market value per
share of Common Stock on the date of exercise and the option exercise price
per share multiplied by the number of shares acquired upon exercise of an
option.
(2) Value of unexercised in-the-money options is equal to the difference between
the fair market value per share of Common Stock at December 31, 1996 and the
option exercise price per share multiplied by the number of shares subject
to options.
SEVERANCE PROTECTION AGREEMENTS
The Company has entered into Severance Protection Agreements with each of
the executive officers of the Company named in the Executive Compensation Table
providing them with severance compensation equal to 2.9 times their annual
salary and bonus in the event their employment is terminated for certain reasons
within 36 months following a change in control of the Company. The reasons for
termination which will result in the obligation to pay severance compensation
include (a) any termination of the executive officer's employment without Cause
(as defined in the Severance Protection Agreement); (b) a change in the
executive officer's status, title, position or responsibilities which represents
an adverse change from his status, title, position or responsibilities as in
effect at any time within 90 days preceding the date of a change in control or
at any time thereafter; the assignment to the executive officer of any duties or
responsibilities which are inconsistent with his status, title, position or
responsibilities as in effect at any time within 90 days preceding the date of a
change in control or at any time thereafter; or any removal of the executive
officer from or failure to reappoint or reelect him to any of such offices or
positions; (c) a reduction in the executive officer's base salary or any failure
to pay the executive officer any compensation or benefits to which he is
entitled within 5 days of the date due; (d) requiring the executive officer to
be based at any place outside a 30-mile radius from the city in which he is
employed; (e) the failure by the Company to (A) continue in effect any material
compensation or employee benefit plan in which the executive officer was
participating at any time within 90 days preceding the date of a change in
control or at any time thereafter or (B) provide the executive officer with
compensation and benefits, in the aggregate, at least equal to those provided
for under each other employee benefit plan, program and practice in which the
executive officer was participating at any time within 90 days preceding the
date of a change in control or at any time thereafter; (f) the insolvency or the
filing of a petition for bankruptcy of the Company, which petition is not
dismissed within 60 days;
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(g) any material breach by the Company of any provision of the Severance
Protection Agreement; (h) any purported termination of the executive officer's
employment for cause which does not comply with the terms of the Severance
Protection Agreement; and (i) the failure of the Company to obtain an agreement,
satisfactory to the executive officer, from any successors and assigns to assume
and agree to perform the Severance Protection Agreement.
Under the Severance Protection Agreements, a "change in control" includes
(a) an acquisition of any voting securities of the Company by any person
immediately after which such person has beneficial ownership of 20% or more of
the combined voting power of the Company's then outstanding voting securities;
(b) the cessation for any reason of the individuals who are presently members of
the Board (the "Incumbent Board") to constitute at least two-thirds of the
Board; provided, however, that if the election, or nomination for election, of
any new director was approved by a vote of at least two-thirds of the Incumbent
Board, such new director shall be considered a member of the Incumbent Board;
and (c) approval by shareholders of the Company of (1) a merger, consolidation
or reorganization involving the Company, unless (i) the shareholders of the
Company, immediately before such merger, consolidation or reorganization, own,
directly or indirectly immediately following such merger, consolidation or
reorganization, at least 80% of the combined voting power of the outstanding
voting securities of the corporation resulting from such merger or consolidation
or reorganization (the "Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities immediately before such
merger, consolidation or reorganization; (ii) the individuals who were members
of the Incumbent Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization constitute at least
two-thirds of the members of the Board of Directors of the Surviving
Corporation; and (iii) no person has beneficial ownership of 15% or more of the
combined voting power of the Surviving Corporation's then outstanding voting
securities; (2) a complete liquidation or dissolution of the Company; or (3) an
agreement for the sale or other disposition of all or substantially all of the
assets of the Company to any person.
DIRECTORS' COMPENSATION
Directors who are employees of the Company do not receive any compensation
for serving as directors of the Company. Other directors receive an annual
retainer of $18,000 and an additional $2,000 payable to any such director who
serves as a chairman of a committee of the Board of Directors, plus an
attendance fee for each such director of $1,000 per regular meeting and $500 per
committee meeting. Under the Company's 1994 Long-Term Stock Incentive Plan,
non-employee directors ("Outside Directors") are automatically granted on the
date of their initial election an option to purchase 5,000 shares of the
Company's Common Stock at an exercise price per share equal to the fair market
value per share of Common Stock on the date of grant. Such options become
exercisable one year after the date of grant and expire ten years after the date
of grant. Outside Directors may also elect to receive options to purchase shares
of Common Stock in lieu of being paid their annual retainer. On November 7,
1996, Messrs. Herdrich, Ingham and Meigs were each granted an option to purchase
4,645 shares of the Company's Common Stock at an exercise price equal to $19.25
per share in lieu of being paid their annual retainer for 1996. Such options
become exercisable on the date of the 1997 annual meeting of stockholders and
expire on November 7, 2006. Additionally, all Outside Directors are reimbursed
for expenses incurred in attending board meetings.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the Compensation Committee was composed of Messrs. Ingham
(Chairman) and Herdrich. In February 1997, Mr. Meigs was also appointed to the
Compensation Committee. Mr. Meigs was an Executive Vice President of the Company
until December 31, 1994. None of the other members of the Compensation Committee
is presently or was formerly an officer or employee of the Company.
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock with the cumulative total return of the Standard & Poor's 500 Stock
Index and the common stock of a peer group selected by the Company for the
period beginning on October 24, 1994 (the date on which the Company's Common
Stock began trading on a when issued basis) through December 31, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DUFF & PHELPS
<S> <C> <C> <C>
Credit Rating Co. S&P 500 Peer Group
24-Oct-94 $100.00 $100.00 $100.00
31-Dec-94 79.25 100.28 97.10
31-Dec-95 116.42 137.96 118.47
31-Dec-96 196.60 169.64 136.82
</TABLE>
Assumes $100 invested on October 24, 1994 in the Company's Common Stock, the
Standard & Poor's 500 Stock Index and the common stock of the peer group
members. All indices assume dividend reinvestment. Peer group index members are
McGraw-Hill, Inc., Dun & Bradstreet Corp., Equifax Inc., Dow Jones & Co. Inc.,
and MBIA Inc. The peer group index is market capitalization-weighted.
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The foregoing table shall not be deemed to be incorporated by reference into
any filing of the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates such information by reference.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's consolidated financial statements for the year ended December
31, 1996, were audited by Arthur Andersen LLP, independent public accountants.
Arthur Andersen LLP has been engaged as the Company's independent auditors for
fiscal year 1997. Representatives of Arthur Andersen LLP are expected to attend
the annual meeting to respond to appropriate questions and to make an
appropriate statement if they desire to do so.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals intended to be presented at the next annual meeting
must be received by the Company for inclusion in its proxy statement and form of
proxy relating to such meeting no later than November 28, 1997.
OTHER MATTERS
The Company is not aware of any matters, other than those referred to
herein, which will be presented at the meeting. If any other appropriate
business should properly be presented at the meeting, the proxies named in the
accompanying form of proxy will vote the proxies in accordance with their best
judgment.
EXPENSES OF SOLICITATION
All expenses incident to the solicitation of proxies by the Company will be
paid by the Company. In addition to solicitation by mail, arrangements have been
made with brokerage houses and other custodians, nominees, and fiduciaries to
send the proxy material to their principals, and the Company will reimburse them
for their reasonable out-of-pocket expenses in doing so. Proxies may also be
solicited personally or by telephone or telegraph by regular employees of the
Company.
Chicago, Illinois
March 28, 1997
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PROXY PROXY
DUFF & PHELPS CREDIT RATING CO.
55 EAST MONROE STREET, CHICAGO, ILLINOIS 60603
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 13, 1997
The undersigned hereby appoints Paul J. McCarthy and Marie C. Becker,
or either of them, as attorneys and proxies, each with the power to appoint
a substitute, and hereby authorizes them to represent and to vote, as
designated below, all the shares of Common Stock of Duff & Phelps Credit
Rating Co. (the "Company") held of record by the undersigned on March 21,
1997, at the annual meeting of stockholders to be held on May 13, 1997 or
any adjournment thereof.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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<PAGE>
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DUFF & PHELPS CREDIT RATING CO.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
For all
Except those whose
With- whose name(s) appear
1. ELECTION OF DIRECTORS -- For hold below
NOMINEES: Donald J. Herdrich, all all
Jonathan Ingham, Philip T. / / / / / /
Maffei, Paul J. McCarthy and _________________________
Milton L. Meigs. IN THEIR DISCRETION, THE
PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
THIS PROXY WHEN PROPERLY
EXECUTED WILL BE VOTED IN
THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCK-
HOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1. THIS
PROXY IS REVOCABLE AT ANY
TIME.
Dated: __________, 1997
Signature(s):_______________
____________________________
(IMPORTANT: Please sign
your name exactly as it
appears hereon. In the
case of joint holders,
all should sign. When
signing as an attorney,
executor, administrator,
trustee or guardian,
please give full title as
such. If a corporation,
please sign in full
corporate name by
President or other
authorized officer. If a
partnership, please sign
to partnership name by
authorized person.)
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