<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 (S) 240.14a-11(c) or (S) 240.14a-12
LINC Capital, Inc.
- --------------------------------------------------------------------------------
(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:
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(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.
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(4) Date Filed:
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<PAGE>
LINC CAPITAL, INC.
303 East Wacker Drive
Suite 1000
Chicago, Illinois 60601
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of LINC Capital, Inc. (the "Company")
will be held on Tuesday, May 19, 1998, at 10:00 a.m. (C.D.T.), at the Swissotel,
323 East Wacker Drive, Chicago, Illinois 60601 for the purpose of considering
and acting upon the following:
(1) The election of seven directors.
(2) Ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the year ending December 31, 1998.
(3) Such other matters as may properly come before the meeting.
The Board of Directors has fixed April 17, 1998, at the close of business,
as the record date for the determination of shareholders entitled to vote at the
meeting, and only holders of shares of Common Stock of record at the close of
business on that day will be entitled to vote. The stock transfer books will not
be closed. A copy of the list of shareholders entitled to vote at this meeting
will be available for examination by any shareholder of record for any purpose
germane to the meeting during normal business hours at the Company's offices,
303 East Wacker Drive, Suite 1000, Chicago, Illinois 60601, during the period
preceding this meeting. A copy of the Company's Annual Report to Shareholders
for 1997 and the Company's Annual Report on Form 10-K for 1997 is being
concurrently mailed to each person on such list.
Whether or not you expect to be present at the meeting, please date, sign
and return the enclosed proxy, which is solicited by the Board of Directors. The
proxy is revocable and will not affect your right to vote in person in the event
you attend the meeting.
By Order of the Board of Directors
/s/ Martin E. Zimmerman
Martin E. Zimmerman
Chairman of the Board and
Chief Executive Officer
April 22, 1998
YOU ARE URGED TO DATE AND SIGN
THE ENCLOSED PROXY AND RETURN IT
PROMPTLY. THANK YOU.
<PAGE>
LINC CAPITAL, INC.
303 East Wacker Drive
Suite 1000
Chicago, Illinois 60601
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of LINC
Capital, Inc., a Delaware corporation (hereinafter, the "Company"), for use at
the Annual Meeting of Shareholders (hereinafter, the "Annual Meeting") to be
held on May 19, 1998 and any adjournment thereof. Proxies in the accompanying
form, properly executed and received by the Secretary prior to the meeting and
not revoked, will be voted FOR the election of directors as set forth herein
(unless otherwise designated) and FOR the ratification of the appointment of
KPMG Peat Marwick LLP as independent auditors for the year ending December 31,
1998. Any proxy may be revoked at any time before it is exercised by giving
notice to the Company prior to or at the Annual Meeting. The approximate date of
mailing of this Proxy Statement is April 22, 1998.
Only holders of Common Stock, par value $.001 per share, of the Company
(hereinafter, the "Common Stock") of record on the books of the Company at the
close of business on April 17, 1998 will be entitled to vote at the Annual
Meeting. As of April 17, 1998, there were 5,183,688 shares of Common Stock
outstanding, the holders of which are entitled to one vote per share. A majority
of the outstanding Common Stock of the Company will constitute a quorum for the
transaction of business at the Annual Meeting, but if a quorum should not be
present, the Annual Meeting may be adjourned until a quorum is obtained.
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of seven directors, all of
whom will be elected at the Annual Meeting. The directors to be elected at the
Annual Meeting shall hold office until the Annual Meeting of Shareholders in
1999 and until their successors shall have been elected and qualified. If the
accompanying form of proxy is properly executed, the persons named as proxies
therein will (unless otherwise designated) vote the shares of Common Stock
represented by such executed proxy for the election of the seven persons named
below. In case any of the nominees is not a candidate at the meeting, an event
which the Board of Directors does not anticipate, the enclosed proxy may be
voted for a substitute nominee and (unless otherwise designated) will be voted
for the other nominees named. Information supplied by the directors concerning
their ages, business experience, and periods of service as directors as of April
1, 1998 is shown below.
<PAGE>
NOMINEES FOR ELECTION AT THE ANNUAL MEETING:
<TABLE>
<CAPTION>
Director
Name Age Position Since
---- --- -------- -----
<S> <C> <C> <C>
Martin E. Zimmerman (1)........ 60 Chairman of the Board and Chief Executive Officer since the formation of 1975
the Company in 1975. From October 1994 until October 1996, he also
served as President and Chief Executive Officer of LINC Anthem
Corporation ("LINC Anthem"), a subsidiary of Anthem Inc., and, after the
sale of LINC Anthem to Newcourt Credit Group (USA), Inc., its subsidiary
Newcourt LINC Financial Inc. ("Newcourt LINC"). Before founding the
Company, Mr. Zimmerman founded and served for seven years as President of
Telco Marketing Services, Inc., a leader in the hospital
equipment-leasing field and the first independent dealer in used medical
equipment.
Robert E. Laing................ 53 President, Chief Operating Officer and Director since 1994. Mr. Laing 1994
joined the Company in 1991 when it acquired his analytical instruments
rental and distribution business. Prior to founding such business in
1989, he was employed for 17 years by U.S. Leasing in various capacities,
including Executive Vice President and Group Executive, Retail Group,
President of U.S. Instrument Rental, Chief Executive Officer of U.S.
Portfolio Leasing and Chief Operating Officer of U.S. Fleet Leasing.
Previously, he held marketing positions with Data Action Corporation and
IBM Corporation.
Allen P. Palles................ 57 Executive Vice President, Chief Financial Officer and Director since 1984
1984. From October 1994 until December 1996, he also served as Chief
Financial Officer of LINC Anthem and Newcourt LINC. Before joining the
Company, he was Treasurer of the Marmon Group, Inc. and held various
senior financial and tax positions at Pullman, Inc. Mr. Palles is a
certified public accountant and attorney and specializes in lease
securitization.
Charles J. Aschauer (2)........ 69 Director. He was employed by Abbott Laboratories, Inc. from 1971 until 1989
his retirement in 1989, and served as Executive Vice President and
Director of that company. Previously, he held senior positions with
Whittaker Corporation, Maremont Corporation, Mead Johnson and Company
after serving as a Principal with McKinsey & Company. He is also a
Director of Boston Scientific Corporation and Trustmark Insurance Company.
Stanley Green (1)(2)(3)........ 58 Director. Was Senior Vice-President of PacifiCorp Capital Corporation 1996
from 1987 until 1992. Mr. Green served as President of Thomas Nationwide
Computer Corporation, a company he founded, until 1987 when it was sold
to PacifiCorp Capital Corporation. He is also an officer and Director of
BioSterile Technologies, Inc. and Thomas Computer Corporation and has
been employed by M.A. Berman and Co. since 1986.
Curtis S. Lane (2)(3).......... 40 Director. Mr. Lane is a Senior Managing Director of Bear, Stearns & Co. 1989
Inc. and head of its healthcare investment-banking group. He has served
in various investment banking capacities with Bear Stearns since 1985 and
also serves on the board of directors of Bear, Stearns & Co., Inc.
Terrence J. Quinn (1).......... 45 Director. President and Chief Executive Officer of Quinn Capital 1991
Services, Inc., a financial advisory firm and President of LFC Capital,
Inc., a company controlled by Martin E. Zimmerman, Chairman and Chief
Executive Officer of LINC Capital, Inc. (the "Company"). From March 1991
until December 1993, he was President of the Company. Previously, he was
President of Medirec, Inc., Matrix Leasing International Inc. and
Churchill Capital Partners, L.P., a subordinated debt fund.
___________________
(1) Member of Credit Policy Committee; (2) Member of Compensation Committee; (3) Member of Audit Committee
</TABLE>
2
<PAGE>
Certain Relationships and Related Transactions
Effective as of November 12, 1997 and simultaneously with completion of the
Company's initial public offering, the Company distributed all of the issued and
outstanding stock of LFC Capital, Inc. (formerly known as LINC Finance
Corporation) ("LFC Capital") to Mr. Martin E. Zimmerman, Chairman and Chief
Executive Officer of LINC Capital, Inc. (the "Company") and Mr. Allen P. Palles,
a Director and Executive Vice President and Chief Financial Officer of the
Company in redemption of 446,483 shares and 36,209 shares, respectively, of
Common Stock of the Company held by them. The principal business activity of
LFC Capital consists primarily of managing and realizing the proceeds of a
portfolio of leased diagnostic imaging equipment as well as managing several
limited partnerships and other assets that were not used in the Company's
ongoing business; provided, however, that LFC Capital may also invest in equity
and debt securities of other companies. Mr. Zimmerman is Chairman of LFC
Capital and Mr. Palles is a director of LFC Capital and they are compensated by
it for their services.
Pursuant to an agreement (the "Servicing Agreement") with LFC Capital,
which became effective on November 12, 1997, the Company has agreed to provide
limited servicing, including billing and cash application for the portfolio of
leases owned by LFC Capital until December 31, 1999 for $270,250 in 1998 and
$212,250 in 1999. The Company received $83,250 for such services performed in
1997. In addition, the Company has sub-leased approximately 2,500 square feet
of office space to LFC Capital at the Company's executive offices for
approximately $68,000 per year, which is equal to the Company's cost for such
space. The Servicing Agreement prohibits LFC Capital from competing with the
Company for the longer of (i) three years or (ii) the period of time during
which Messrs. Zimmerman or Palles are employed by the Company plus one-year.
The Servicing Agreement also requires LFC Capital to refer all lease origination
opportunities it encounters to the Company.
In connection with the distribution of the stock of LFC Capital, LFC
Capital has also agreed to pay the Company an aggregate of $2,508,000 until the
maturity of the Company's 8 1/4% Subordinated Debentures due 2003 of which
$260,000 was paid during 1997.
Terrence J. Quinn, a director of the Company and President of LFC Capital
serves as a consultant to the Company with respect to various aspects of the
Company's business and strategic issues. Fees paid for such services by the
Company for the year ended December 31, 1997 were $119,000. A portion of such
fees were paid pursuant to the terms of a one-year consulting agreement the
Company entered into with Mr. Quinn on October 31, 1997 to perform certain
consulting services in connection with the Company's activities relating to
acquisitions of leasing and rental companies as well as other strategic
initiatives (the "Consulting Agreement"). Fees paid under the Consulting
Agreement are dependent on the number of days of consulting services provided
per month with a base monthly fee of $6,250 for three days of consulting
services provided and $2,500 per day for each additional day, plus reimbursement
for travel and entertainment expenses directly incurred in connection with the
services provided to the Company. The Company may also pay such other
additional fees relating to the success of an acquisition transaction as may be
approved by the Compensation Committee of the Board of Directors. The total
annual amount paid under the terms of the Consulting Agreement, including
reimbursed expenses, in excess of $100,000 during the initial term thereof is
subject to the approval of the Compensation Committee. The Consulting Agreement
is subject to termination by the Company or Mr. Quinn on 90 days notice.
During 1997, Robert E. Laing, President, Chief Operating Officer and
Director of the Company, and Allen P. Palles, Executive Vice President, Chief
Financial Officer and Director of the Company issued promissory notes secured by
shares of the Company's Common Stock to the Company in connection with the
exercise of stock options by them. The secured promissory notes bear interest
at 8%. During 1997, the largest indebtedness outstanding under the notes for
Mr. Laing and Mr. Palles was $344,000 and $173,000,
3
<PAGE>
respectively. In 1998, Mr. Laing repaid all of such indebtedness. As of March
31, 1998, the indebtedness outstanding under the note issued by Mr. Palles was
$177,000.
Information Regarding the Board of Directors
The Board of Directors held five meetings during 1997 (one of which was
telephonic). Each director attended all of the five meetings of the Board of
Directors except Curtis S. Lane who attended four of the meetings of the Board
of Directors. Each director attended all of the meetings for the Board
Committees on which such director served. Shortly prior to the completion of
the Company's initial public offering of common stock on November 12, 1997, the
Board of Directors established an Audit Committee, a Compensation Committee and
a Credit Policy Committee.
The Audit Committee of the Board of Directors has the authority to make
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the plan and results of the audit
engagement, review the independence of the independent public accountants,
consider the range of audit and non-audit fees and review the adequacy of the
Company's internal accounting controls. The Audit Committee consists of Mr.
Green and Mr. Lane. No officers of the Company serve on the Audit Committee.
There were no formal meetings of the Audit Committee during 1997.
The Compensation Committee of the Board of Directors has the authority to
determine compensation for the Company's executive officers and to administer
the Company's option plans. The Compensation Committee consists of Mr. Green,
Mr. Lane, and Mr. Aschauer and met once. No officers of the Company serve on
the Compensation Committee.
The Credit Policy Committee of the Board of Directors periodically reviews
the Company's credit policies and procedures and underwriting standards. The
Credit Policy Committee consists of Mr. Zimmerman, Mr. Green and Mr. Quinn and
met once during 1997.
The Board of Directors does not have a nominating committee.
Each director who is not an officer of the Company received a fee of
$15,000 per year and is reimbursed for out-of-pocket expenditures incurred to
attend Board and Committee meetings. The Company's directors have also been
granted options to purchase shares of Common Stock. See "Directors' Options".
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities to file reports
of securities ownership and changes in such ownership with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than ten
percent beneficial owners also are required, by rules promulgated by the SEC, to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Company, or written representations that no Form 5 filings were required, the
Company believes that during 1997 all of its officers, directors and greater
than ten percent beneficial owners complied with Section 16(a) filing
requirements applicable to them.
4
<PAGE>
Certain Beneficial Owners
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 17, 1998, (a) by each person
known by the Company to own beneficially more than five percent of such
outstanding Common Stock, (b) by each executive officer and director of the
Company and (c) by all executive officers and directors of the Company as a
group. Each of such shareholders has sole voting and investment power as to
shares shown unless otherwise noted.
<TABLE>
<CAPTION>
Shares Owned Percent of
Name Beneficially (1)(2) Class (4)
---- ------------------- ----------
<S> <C> <C>
Martin E. Zimmerman (1)................................................. 2,602,444 49.8%
John Hancock Advisers, Inc. (3)......................................... 328,500 6.3
Allen P. Palles (4)..................................................... 278,234 5.3
Robert E. Laing (4)..................................................... 213,752 4.1
Curtis S. Lane.......................................................... 59,659 1.1
Charles J. Aschauer (5)................................................. 58,826 1.1
Stanley Green (6)....................................................... 51,460 1.0
Terrence J. Quinn....................................................... 42,507 *
William J. Erbes........................................................ 10,238 *
Gerard M. Farren........................................................ 938 *
All directors and executive officers as a group (8 persons)............. 2,853,772 54.6%
</TABLE>
____________________
* Represents less than 1%.
(1) Includes 1,363,998 shares owned by Mr. Zimmerman, 624,674 shares held by
Mr. Zimmerman as trustee under trusts for the benefit of two of his
children and 611,272 shares held by Mr. Laing, Mr. Palles and one other
employee of the Company for which Mr. Zimmerman holds proxies.
(2) Includes shares obtainable upon exercise of stock options which are or
become exercisable prior to June 17, 1998 as follows: Mr. Zimmerman, 2,500
shares; Mr. Palles, 4,790 shares; Mr. Laing, 22,910 shares; Mr. Lane, 3,333
shares; Mr. Aschauer, 3,333 shares; Mr. Green, 4,583 shares; Mr. Quinn,
3,333 shares; Mr. Erbes, 868 shares; Dr. Farren, 938 shares; and all
directors and executive officers as a group, 45,651 shares. The
percentages set forth in the above table give effect to the exercise of
these options.
(3) Share ownership was provided on Form SC 13G as of February 13, 1998 as
filed by the holder on such date.
(4) All shares are subject to a proxy and right of first refusal held by Mr.
Zimmerman, except shares obtainable upon exercise of stock options which
are or become exercisable prior to June 17, 1998 as follows: Mr. Palles,
4,790 shares and Mr. Laing, 22,910 shares.
(5) All shares held by Mr. Aschauer are held by him as trustee in a living
trust the beneficiaries of which are his children.
(6) Includes 39,042 shares held by Mr. Green as trustee under a trust for the
benefit of Justine Zimmerman, Mr. Zimmerman's daughter.
Executive Compensation
The following table presents certain information concerning compensation
earned for services rendered during 1997 and 1996 to the Company by the Chief
Executive Officer and each of the other executive officers. Messrs. Zimmerman
and Palles were employed for a substantial portion of 1996 by LINC Anthem and
Newcourt LINC and were paid additional compensation by them. A substantial
portion of the compensation paid to Messrs. Zimmerman, Laing and Palles during
1997 and 1996 was with respect to operations of LFC Capital and other
discontinued operations of the Company and was charged to LFC Capital. Effective
November 12, 1997, the Company entered into employment contracts with Messrs.
Zimmerman, Laing, Palles and Erbes, and Dr. Farren. See "Employment Contracts."
5
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation(1) Long Term Compensation
---------------------- ----------------------
Other Annual Awards- All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation Options(#) Compensation
- --------------------------- ---- ---------- --------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Martin E. Zimmerman..................... 1997 $555,193 $ -- $89,021(2) 20,000 4,750
Chairman and Chief Executive Officer 1996 328,600 637,771 87,137(2) -- --
Robert E. Laing......................... 1997 269,504 -- 10,000 4,750
President and Chief Operating Officer 1996 272,100 495,000 -- 132,765 4,500
Allen P. Palles......................... 1997 230,066 -- 10,000 4,750
Executive Vice President and Chief 1996 55,450 181,686 -- 100,876 --
Financial Officer
Gerard M. Farren........................ 1997 204,600 70,200 7,500 4,750
Senior Vice President--Instrument 1996 197,100 72,188 -- -- 4,500
Rental and Distribution
William J. Erbes........................ 1997 153,540 18,750 6,250(3) 6,942 4,750
Senior Vice President--Business 1996 144,423 52,500 -- -- 4,500
Development
</TABLE>
- -------------------------
(1) See "Employment Contracts" for annual compensation effective as of November
12, 1997.
(2) This amount consists of life insurance premiums and tax preparation services
paid for by the Company.
(3) This amount represents deferred compensation payable during 1997 but
deferred at the election of Mr. Erbes.
The following table sets forth the number of shares of the Company's Common
Stock subject to stock options granted to the individuals listed in the Summary
Compensation Table during 1997, together with related information.
<TABLE>
<CAPTION>
Option Grants in 1997
Individual Grants
-----------------
Potential realizable
Percent of value at assumed annual
total options Exercise rates of stock price
Options granted to or base appreciation for option
granted employees price Expiration term (1)
Name (#) in 1997 ($/Sh) Date 5% ($) 10% ($)
---- --- ------- ------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Martin E. Zimmerman............ 20,000 10.92% $13.00 11/05/07 $163,513 $414,373
Robert E. Laing................ 10,000 5.46 13.00 11/05/07 81,756 207,187
Allen P. Palles................ 10,000 5.46 13.00 11/05/07 81,756 207,187
Gerard M. Farren............... 7,500 4.10 13.00 11/05/07 56,755 143,829
William J. Erbes............... 6,942 3.79 13.00 11/05/07 61,317 155,390
</TABLE>
- -------------------------------
(1) In calculating the potential realizable value, the Company used the market
price of $13.00 per share as the date of grant.
6
<PAGE>
The following table sets forth the number of shares of the Company's Common
Stock subject to stock options exercised by the individuals listed in the
Summary Compensation Table during 1997, together with related information, and
the value of the unexercised options.
Aggregated Option Exercises in 1997,
and 1997 Year-End Option Values
<TABLE>
<CAPTION>
Number of Value of unexercised
unexercised options in-the-money options
Shares at December 31, 1997 at December 31, 1997 (2)
acquired on Value -------------------- ------------------------
Name exercise (#) realized ($)(1) exercisable unexercisable exercisable unexercisable
- ---- ------------ --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martin E. Zimmerman........ -- $ -- -- 20,000 $ -- $ 132,500
Robert E. Laing............ 190,843 1,075,213 -- 115,907 -- 1,932,851
Allen P. Palles............ 75,401 406,411 -- 35,475 -- 509,642
Gerard M. Farren........... -- -- -- 7,500 -- 49,688
William J. Erbes........... 9,370 53,831 -- 10,630 -- 112,799
</TABLE>
- -----------------------
(1) Based upon the difference between the initial public offering price of the
Company's common stock of $13.00 per share and the exercise price.
(2) Based upon the difference between the closing price of the common stock on
the Nasdaq National Market on December 31, 1997 of $19.625 and the exercise
price.
Employment Contracts
Effective as of November 12, 1997, the Company entered into an employment
contract with Mr. Zimmerman providing for (i) an annual base salary of $275,000
per year, subject to increase at the discretion of the Board of Directors; (ii)
reimbursement of premiums at an annual estimated cost of approximately $50,000
for a life insurance policy; and (iii) customary benefits and perquisites. The
agreement has a three-year evergreen term unless either the Company or Mr.
Zimmerman gives 90 days' notice of termination. If the agreement is terminated
by the Company without cause or within six months prior to or one year after a
change of control, Mr. Zimmerman will be entitled to severance pay equal to
three times the sum of (i) his then-current annual base salary; (ii) his most
recent annual bonus and incentive payment; and (iii) employer contributions to
his retirement plan for the 12 months preceding such termination, plus an
additional amount if necessary to make the executive whole with respect to any
excise taxes on such severance pay. The agreement provides that Mr. Zimmerman
will not engage in other business activities without the consent of the Company,
except for charitable and professional trade associations and passive personal
investments, and except that Mr. Zimmerman may serve as chairman and as an
officer and director of an affiliated company, LFC Capital, so long as such
activity does not materially interfere with his duties to the Company. The
agreement prohibits Mr. Zimmerman from competing with the Company for one year
following the termination of his employment with the Company.
Also, effective November 12, 1997, the Company entered into employment
contracts with Messrs. Laing, Palles and Erbes and Dr. Farren providing for (i)
an annual base salary of $240,000 for Mr. Laing, $185,000 for Mr. Palles,
$195,000 for Dr. Farren and $142,500 for Mr. Erbes, all subject to increase at
the discretion of the Board of Directors; and (ii) customary benefits and
perquisites. The agreements have a one-year evergreen term and may be
terminated by the Company or the applicable executive upon 60 days notice. If
the agreements are terminated by the Company without cause or within six months
prior to or one year after a change of control, the applicable executive will be
entitled to severance pay equal to the sum of (i) his then-current base salary;
(ii) his most recent annual bonus and incentive payment; and (iii) employer
contributions to his retirement plan for the 12 months preceding such
termination. The agreements prohibit the applicable executive from competing
with the Company for one year following the termination of his employment with
the Company. Such employment agreements require that the applicable executive
devote substantially all of
7
<PAGE>
his business time to the Company's affairs, except for charitable and
professional trade associations and passive personal investments, and with
respect to Mr. Palles, except for his services as a director of LFC Capital.
Stock Option Plans
The Company adopted its 1994 Stock Option Plan, 1997 Stock Incentive Plan
and Non-Employee Director Option Plan to align the interests of its executives,
employees and directors with those of its stockholders. Options covering 488,928
shares of Common Stock were granted pursuant to the 1994 Stock Option Plan (of
which, options covering 134,659 shares were outstanding as of April 1, 1998) and
no further options can be granted under such plan. The 1997 Stock Incentive Plan
permits the grant of stock options and other equity based awards with respect to
375,000 shares of Common Stock to executives and employees of the Company and
its subsidiaries. The Board of Directors or the Compensation Committee is
authorized to select recipients and to establish the exercise price, number of
shares, option term and other provisions of any grant. As of April 1, 1988,
options covering 188,196 shares of Common Stock were granted pursuant to the
1997 Stock Incentive Plan (184,196 of which were outstanding as of such date).
The Non-Employee Director Option Plan permits the grant of options with respect
to 100,000 shares of Common Stock to the non-employee directors of the Company.
As of April 1, 1998, options covering 58,332 shares of Common Stock were granted
pursuant to the Non-Employee Director Option Plan (all of which were outstanding
as of such date).
Executive Incentive Compensation Plan
Effective as of the Company's initial public offering, the Board of
Directors adopted the Executive Incentive Compensation Plan (the "Incentive
Plan"). The Incentive Plan provides for the payment of additional annual cash
bonuses if the Company's after-tax earnings for the fiscal year (determined
without regard to payments under the Incentive Plan) exceeds 17.5% of the
Company's Average Common Equity (as defined below) for such fiscal year. If the
threshold is satisfied in any given fiscal year, the aggregate award
compensation that will be paid under the Incentive Plan for that particular
fiscal year (the "Incentive Pool") will be equal to 2.5% of the Company's pre-
tax earnings (determined after deduction for payments under the Incentive Plan),
to the extent that after-tax earnings (determined after deduction for payments
under the Incentive Plan) are not less that 17.5% of the Company's Average
Common Equity for such fiscal year. The Average Common Equity for such fiscal
year is the average of the balance of equity attributable to the outstanding
Common Stock of the Company (including par value, additional paid in capital and
retained earnings), as reflected in the financial statements of the Company at
the end of each quarter during the fiscal year. The entire amount in each
Incentive Pool will be paid in cash to the Incentive Plan participants within
three and one-half months after the last day of the fiscal year to which such
Incentive Pool relates. Not more than 75% of the Incentive Pool will be paid to
the Chief Executive Officer, the President and the Chief Financial Officer of
the Company, with each such individual's share of such aggregate amount to be
determined by the Chief Executive Officer and subject to approval of the Board
of Directors. The balance of the Incentive Pool will be paid to other senior
management employees of the Company as determined by the Chief Executive Officer
and subject to the approval of the Board of Directors. No awards were made
under the Incentive Plan for 1997.
Directors' Options
During 1997, Messrs. Zimmerman, Laing, and Palles were granted options with
respect to 20,000, 10,000, and 10,000 shares of Common Stock, respectively.
Such options have an exercise price of $ 13.00, ten-year terms and vest in one-
eighth increments over the four years following the grant date based upon
continued employment by the Company over such period.
8
<PAGE>
In addition, during 1997, Messrs. Aschauer, Lane, and Quinn were granted
options with respect to 13,333 shares of Common Stock, and Mr. Green was granted
options with respect to 18,333 shares of Common Stock. Such options have an
exercise price of $13.00, have ten year terms and vest in one quarter increments
over the two years following the grant date based upon continued service on the
Board during such period.
Report of the Compensation Committee
The Compensation Committee (hereinafter, the "Committee"), is comprised of
three out of seven of the Company's directors, Messrs. Aschauer, Lane and Green.
The Committee reviews and approves the compensation of each of the executive
officers of the Company (hereinafter, the "Officers"). The Committee also
administers employee stock option plans and other benefit plans.
The Company's compensation program for Officers is designed to reward such
officers for their individual performance and contribution to the Company while
at the same time being tied directly to the Company's overall performance. The
Committee and the Board of Directors believe that a direct relationship between
Officers' compensation and the Company's performance is a very important factor
in achieving the Company's objective of maximizing shareholder value. The
Company's executive compensation program consists of a base salary, a
discretionary cash bonus plan, and participation in the 1997 Stock Incentive
Plan and the Incentive Plan.
During 1997, the Compensation Committee, on recommendation of the Chairman
and Chief Executive Officer, authorized the granting of options to purchase
97,404 shares of the Company's common stock to 61 employees of the Company under
the 1997 Stock Incentive Plan.
In determining the Chief Executive Officer's compensation package, the
Compensation Committee uses the same criteria as for all other Officers, as well
as the comparable compensation packages of other chief executive officers in
other financial service companies and considers the extensive experience of the
Chief Executive Officer in the development of specialty finance companies. In
connection with the Company's initial public offering in November 1997, the
Company entered into employment contracts with the Chief Executive Officer and
other senior executives of the Company. See "Employment Contracts".
COMPENSATION COMMITTEE
Charles Aschauer
Stanley Green
Curtis Lane
9
<PAGE>
Stock Price Performance Graph
The following graph compares the total return of the Company's Common Stock
with the Center for Research in Securities Prices ("CRSP") Total Return Index
for the Nasdaq Stock Market (U.S. Companies) (the "Nasdaq Stock Market-U.S.
Index") and the CRSP Total Return Index for Nasdaq Financial Stocks (the "Nasdaq
Financial Index") during the period commencing on November 6, 1997, the date of
the Company's initial public offering, and ending on December 31, 1997. The
comparison assumes $100 was invested on November 6, 1997 in the Company's Common
Stock, the Nasdaq Stock Market-U.S. Index, and the Nasdaq Financial Index and
assumes the reinvestment of all dividends, if any.
EDGAR representation of data points used in printed graphic
<TABLE>
<CAPTION>
11/6/97 12/31/97
------------- ------------
<S> <C> <C>
LINC Capital, Inc. $100 $135
Nasdaq Stock Market U.S. Index 100 97
Nasdaq Financial Index 100 107
</TABLE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon recommendation by the Audit Committee, the Board of Directors has
appointed KPMG Peat Marwick LLP as independent auditors for the year ending
December 31, 1998. The Company has been advised that KPMG Peat Marwick LLP has
no relationship with the Company or its subsidiaries other than that arising
from their role as the Company's auditors.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
1997 Annual Meeting with the opportunity to make a statement if they so desire
and to be available to respond to appropriate questions relating to that firm's
examination of the Company's financial statements for 1997.
DISCRETIONARY VOTING OF PROXIES IN OTHER MATTERS
The Board of Directors of the Company does not know of any other matters
that are to be presented for action at the meeting. Should any other matter
come before the meeting, however, the persons named in the enclosed proxy will
have discretionary authority to vote all proxies with respect to such matter in
accordance with their judgment.
10
<PAGE>
SUBMISSION OF SHAREHOLDER PROPOSALS
All proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company at its executive offices
no later than the close of business on December 15, 1998 for inclusion in the
Company's Proxy Statement and form of proxy relating to that meeting.
Voting Procedures
Under Delaware law and the Company's Certificate of Incorporation and By-
laws, if a majority of the shares entitled to vote is present at the meeting in
person or by proxy (i) the seven nominees for election as directors who receive
the greatest number of votes cast for the election of directors at the meeting
by the shares present in person or by proxy and entitled to vote shall be
elected directors and (ii) proposal 2 and any other matters submitted to a vote
of the shareholders must be approved by the affirmative vote of the majority of
shares present in person or by proxy and entitled to vote on the matter. In the
election of directors, any action other than a vote for a nominee will have the
practical effect of voting against the nominee. Abstention from voting will
have the practical effect of voting against any of the other matters since it is
one less vote for approval. Broker nonvotes on one or more matters will have no
impact on such matters since they are not considered "shares present" for voting
purposes.
ADDITIONAL INFORMATION
This solicitation is being made by the Company. All expenses of the
Company in connection with solicitation will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited by directors,
officers and other employees of the Company by telephone, telex, in person or
otherwise, without additional compensation. The Company will request brokerage
firms, nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners of shares held of record by such persons and will reimburse
such persons and the Company's transfer agent for their reasonable out-of-pocket
expenses in forwarding such materials.
By Order of the Board of Directors
/s/ Martin E. Zimmerman
Martin E. Zimmerman
Chairman of the Board and
Chief Executive Officer
April 22, 1998
11
<PAGE>
LINC CAPITAL, INC.
Proxy is Solicited on Behalf of the Board of Directors for the
Annual Meeting of Stockholders
May 19, 1998
The undersigned does hereby appoint MARTIN E. ZIMMERMAN and ALLEN P. PALLES
and each of them, attorneys-in-fact and agents with full powers of substitution,
for and in the name, place and stead of the undersigned, to vote as proxies or
proxy all the shares of Common Stock of LINC Capital, Inc. ("LINC") to be held
at The Swissotel, 323 East Wacker Drive, Chicago, Illinois, on Tuesday, May 19,
1998 at 10:00 a.m., Central Daylight Time, and at any and all adjournments or
postponements thereof.
PLEASE VOTE, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on the reverse side.)
LINC CAPITAL, INC.
PLEASE MARK VOTES AS IN THIS EXAMPLE USING DARK INK ONLY.
This proxy will be voted as specified below. If no voting instructions are
indicated with respect to one or more of the proposals, the proxy will be voted
in favor of the proposal(s). This proxy confers authority for each of the
persons indicated on the reverse to vote in his discretion on other matters
which may properly come before the meeting. The Board of Directors recommends a
Vote FOR Items 1 and 2.
1. ELECTION OF DIRECTORS For Withhold For All
Martin E. Zimmerman All All Except
Robert E. Laing, Allan P. Palles, [_] [_] [_]
Terrence J. Quinn, Curtis S. Lane,
Charles J. Aschauer, Stanley Green
- ------------------------------------------------------
(Instruction: To withhold authority to vote for any
nominee(s), write the name(s) of such nominee(s)
above.
2. PROPOSAL to ratify the selection
of KPMG PEAT MARWICK LLP to For Against Abstain
serve as the Company's independent [_] [_] [_]
auditors.
Receipt of the Notice of Annual Meeting of Stock
holders and proxy statement is hereby confirmed.
Please sign exactly as your name appears hereon or
on the stock certificate. Executors, administrators or trustees
should indicate their capacities. If stock is held in joint
names, both registered holders should sign. No witness or
notarization is necessary.
Date: ___________________________________________________________
Signature: ______________________________________________________
Signature, if held jointly: _____________________________________
