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):
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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 Wednesday, May 26, 1999, 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) To elect six directors.
(2) To approve an amendment to the Company's 1997 Stock Incentive Plan.
(3) To approve an amendment to the Company's Non-Employee Director
Stock Option Plan.
(4) To ratify the appointment of KMPG LLP as the Company's
independent auditors for the year ending December 31, 1999.
(5) To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed April 23, 1999, 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 1998 and the Company's Annual Report on Form 10-K for 1998 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 28, 1999
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, for use at the Annual Meeting of
Shareholders (hereinafter, the "Annual Meeting") to be held on May 26, 1999 and
any adjournment thereof. As used in this proxy statement, unless the context
otherwise requires, the term "Company" refers to LINC Capital, Inc. and all of
its subsidiaries and its and their respective predecessors and subsidiaries.
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
amendment to the Company's 1997 Stock Incentive Plan, FOR the amendment to the
Company's Non-Employee Director Stock Option Plan and FOR the ratification of
the appointment of KMPG LLP as independent auditors for the year ending December
31, 1999. 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 30, 1999.
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 23, 1999 will be entitled to vote at the Annual
Meeting. As of April 23, 1999, there were 5,265,000 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.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of seven (7). Upon
the resignation of Mr. Charles J. Aschauer, Jr. as a director, becoming
effective on May 26, 1999, the Board of Directors has decided to reduce the
number of directors serving on the Board of Directors to six directors from
seven directors. Six (6) directors 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 2000 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 six 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, 1999 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)(4)(5)........ 61 Chairman of the Board and Chief Executive Officer since the 1975
formation of 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. Mr. Zimmerman earned a B.S. degree in
electrical engineering from M.I.T. in 1959 and an M.B.A. in
finance in 1961 from Columbia University Graduate School of
Business, where he was a Kennecott Copper Fellow and a McKinsey
Scholar.
Robert E. Laing................... 54 President, Chief Operating Officer and Director since 1994. Mr. 1994
Laing 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 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................... 58 Executive Vice President, Chief Financial Officer and Director 1984
since 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 licensed attorney.
Stanley Green (1)(2)(3)(4)(5)........ 60 Director. Mr. Green was Senior Vice-President of PacifiCorp 1996
Capital Corporation 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)............. 42 Director. Mr. Lane is a Partner of Evercore Partners, Inc., a 1989
private equity fund. From 1985 to 1998 he was a Senior Managing
Director of Bear, Stearns & Co. Inc. and head of its healthcare
investment-banking group. He has served in various investment
banking capacities with Bear, Stearns & Co., Inc. and also
served on the board of directors of Bear, Stearns & Co., Inc.
Terrence J. Quinn (1)(5).......... 47 Director. Mr. Quinn is President and Chief Executive Officer of 1991
Quinn Capital 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 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;
(4) Member of Nominating Committee; (5) Member of Executive Committee.
</TABLE>
<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 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 liquidation 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. In addition, LFC
Capital invests in real estate and the 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. The Company received
$270,000 and $83,000 for such services performed in 1998 and 1997, respectively.
The Company has agreed to provide such services to LFC Capital for $156,000 in
1999. 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 in 1998 and 1997, which is equal to the Company's cost for such space.
In 1999, LFC Capital will sublease from the Company approximately 1,000 square
feet for $27,000. 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 and $308,000 was paid during 1998.
As of April 16, 1999, LFC Capital owns 23,000 shares of the Company's
Common Stock.
Terrence J. Quinn, a director of the Company also serves as President of
LFC Capital and is compensated for his services to LFC Capital by LFC Capital.
Mr. Quinn also 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 were $119,000 for the year ended December 31, 1997
$188,000 for the year ended December 31, 1998 (including, a referral fee paid in
connection with the acquisition of Comstock Leasing, Inc.). 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 during 1998 were 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 per month 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 term of the
Consulting Agreement was renewed for a one-year term effective October 31, 1998,
with the per diem decreased from $2,500 to $2,100 per day for each additional
day in excess of the three (3) days. 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 ninety (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 1998, the largest indebtedness outstanding under the notes for Mr.
Laing and Mr. Palles was $347,000 and $188,000, respectively. In 1998, Mr. Laing
repaid all of such indebtedness. As of March 31, 1999, the indebtedness
outstanding under the note issued by Mr. Palles was $192,000.
Information Regarding the Board of Directors
The Board of Directors held five (5) meetings during 1998 (one of which was
telephonic). Each director attended all of the five (5) meetings of the Board of
Directors, except Mr. Lane who did not attend one board meeting. Each director
attended all of the meetings for the Board Committees on which such director
served. The Board of Directors has established an Audit Committee, a
Compensation Committee, a Credit Policy Committee, a Nominating Committee and an
Executive 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 was one (1) formal meeting of the Audit Committee during 1998.
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 during 1998 consisted of
Mr. Green, Mr. Lane, and Mr. Aschauer. There were two (2) formal meetings of the
Compensation Committee during 1998. 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.
There were two (2) formal meetings of the Credit Policy Committee during 1998.
The Nominating Committee of the Board of Directors has the authority to
make recommendations concerning the nominating of replacement directors for the
Board of Directors. In 1998 the Nominating Committee consisted of Mr. Zimmerman,
Mr. Aschauer and Mr. Green. There were no formal meetings of the Nominating
Committee during 1998. The Nominating Committee does not contemplate soliciting
shareholder recommendations.
The Executive Committee of the Board of Directors has certain powers and
authority in the management of the business and affairs of the Company when the
Board of Directors is not in session. The Executive Committee consists of Mr.
Zimmerman, Mr. Green and Mr. Quinn. There was one (1) formal meeting of the
Executive Committee during 1998.
Each director who is not an officer of the Company received a fee of
$15,000 in 1998 and was 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 Section 16(a) forms
furnished to the Company, or written representations that no Form 5 filings were
required, the Company believes that during 1998 all of its officers, directors
and greater than ten percent (10%) beneficial owners complied with Section 16(a)
filing requirements applicable to them.
Certain Beneficial Owners
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 16, 1999, (a) by each person
known by the Company to own beneficially more than five percent of such
outstanding Common Stock, (b) by each director, (c) by the Chief Executive
Officer and the next four most highly compensated executive officers, and (d) 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.
<PAGE>
TABLE OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
Shares Owned Percent of
Name Beneficially (2) Class
---- ---------------- -----
<S> <C> <C>
Martin E. Zimmerman (1)(5)..................................... 2,737,229 50.2%
Wellington Management Company, LLP (3)......................... 513,200 9.4
Allen P. Palles (4) (5)(5)..................................... 284,087 5.2
Robert E. Laing (4)(5)......................................... 284,270 5.2
Curtis S. Lane................................................. 66,326 1.2
Stanley Green (7).............................................. 63,484 1.2
Terrence J. Quinn.............................................. 49,174 *
Charles J. Aschauer (8)........................................ 30,000 *
Gerard M. Farren............................................... 16,013 *
William J. Erbes............................................... 13,612 *
All directors and executive officers as a group (11 persons)... 3,009,926 55.2%
</TABLE>
- --------------------------------
* Represents less than 1%.
(1) Includes 624,674 shares held by Mr. Zimmerman as trustee under trusts
for the benefit of two of his children, 23,000 shares held by LFC
Capital, an entity controlled by Mr. Zimmerman, and 663,258 shares held
by Mr. Laing, Mr. Palles (including 30,000 shares held by The Palles
Family Trust, the beneficiaries of which are Mr. Palles' wife and
children and under which Mr. Palles has disclaimed a beneficial
interest) 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 16, 1999 as follows: Mr. Zimmerman,
43,141 shares; Mr. Palles, 40,643 shares; Mr. Laing, 41,442 shares; Mr.
Lane, 10,000 shares; Mr. Green, 13,750 shares; Mr. Quinn, 10,000
shares; Mr. Aschauer, 10,000 shares; Dr. Farren, 2,813 shares; Mr.
Erbes, 4,242 shares; and all directors and executive officers as a
group, 182,905 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 9, 1999 as
filed by the holder on such date. The address of this entity as
provided on Schedule 13G is 75 State Street, Boston, Massachusetts
02109
(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
under the 1997 Stock Incentive Plan which are or become exercisable
prior to June 16, 1999 as follows: Mr.
Palles, 28,607 shares and Mr. Laing, 28,607 shares.
(5) This person's address is 303 East Wacker Drive, #1000, Chicago,
Illinois 60601.
(6) Includes 41,899 shares held by Mr. Green as trustee under a trust
for the benefit of Justine Zimmerman, Mr. Zimmerman's daughter.
(7) All shares held by Mr. Aschauer are held by him as trustee in a living
trust, the beneficiaries of which are his children.
Executive Compensation
The following table presents certain information concerning compensation
earned for services rendered during 1998, 1997 and 1996 to the Company by the
Chief Executive Officer and each of the four most highly compensated 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."
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation 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................. 1998 $297,669(1) $137,500 $ 48,249(2) 58,141 $5,000
Chairman and Chief Executive 1997 555,193 -- 89,021(2) 20,000 4,750
Officer 1996 328,600 637,771 87,137(2) -- --
Robert E. Laing..................... 1998 258,210(1) -- 36,107 5,000
President and Chief Operating 1997 269,504 -- 120,000(3) 10,000 4,750
Officer 1996 272,100 495,000 -- 132,765 4,500
Allen P. Palles..................... 1998 197,718(1) 92,500 -- 36,107 5,000
Executive Vice President and 1997 230,066 -- -- 10,000 4,750
Chief Financial Officer 1996 55,450 181,686 -- 100,876 --
Gerard M. Farren.................... 1998 204,600(1) 100,000 -- -- 5,000
Senior Vice President--Instrument 1997 204,600 70,200 7,500 4,750
Rental and Distribution 1996 197,100 72,188 -- -- 4,500
William J. Erbes.................... 1998 144,486(1) 55,500 4,500(3) -- 3,792
Senior Vice President--Business 1997 153,540 18,750 6,250(3) 6,942 4,750
Development 1996 144,423 52,500 -- -- 4,500
</TABLE>
- ----------------------
(1) This amount includes base salary and customary benefits and perquisites as
provided in each person's employment contract.
(2) This amount consists of life insurance premiums and tax preparation services
paid for by the Company.
(3) This amount represents bonus compensation deferred at the election of such
executive made in accordance with and subject to the terms of the Company's
Non-Qualified Management Incentive Plan.
The following table sets forth the number of shares of the Company's Common
Stock subject to stock options granted to the individuals listed in the Summary
Compensation Table through December 31, 1998, together with related information.
Option Grants in 1998
<TABLE>
<CAPTION>
Individual Grants
-----------------
Potential realizable
Percent of value at assumed annual
Total options Exercise rates of stock price
Granted to or base appreciation for option term
Options employees price Expiration (1)
Name granted in 1998 ($/Share) Date 5% 10%
(#)
---- --- ------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Martin E. Zimmerman....... 30,000 9.8% $19.250 05/19/08 $363,187 $920,386
Martin E. Zimmerman 28,141 9.2% 7.938 10/28/08 140,485 356,015
Robert E. Laing(2)........ 15,000 4.9% 13.000 05/19/08 181,593 460,193
Robert E. Laing 21,107 6.9% 7.938 10/28/08 105,370 267,027
Allen P. Palles(2)........ 15,000 4.9% 13.000 05/19/08 181,593 460,193
Allen P. Palles 21,107 6.9% 7.938 10/28/08 105,370 267,027
(1) In calculating the potential realizable value, the Company used the grant price per share as of the date
of grant.
(2) On December 15, 1998 the Company adjusted the exercise price to $13.00 per share for such for options held by Messrs.
Laing and Palles where the exercise price was originally $19.25 per share to $13.00 per share.
(3) These options have been granted subject to Shareholder approval.
</TABLE>
<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 1998, together with related information, and
the value of the unexercised options.
Aggregated Option Exercises in 1998,
and 1998 Year-End Option Values
<TABLE>
<CAPTION>
Shares Number of Value of unexercised
acquired on Value Unexercised options in-the-money options
Name exercise (#) Realized at December 31, 1998 at December 31, 1998 (1)
- ---- ------------ -------- -------------------- ------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martin E. Zimmerman.... -- $0.00 36,891 41,250 $8,724 $ --
Robert E. Laing........ -- $0.00 77,468 74,546 335,058 325,144
Allen P. Palles........ -- $0.00 33,978 37,604 57,774 102,383
Gerard M. Farren....... -- $0.00 1,875 5,625 2,231 6,694
William J. Erbes....... -- $0.00 3,375 6,844 13.112 17,235
- ------------------------------
(1) Based upon the difference between the closing price of the common stock on the Nasdaq National Market on December
31, 1998 of $8.25 and the exercise price.
</TABLE>
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 ninety (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 twelve (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 sixty (60) days' notice. If the
agreements are terminated by the Company without cause or within six (6) 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 (1) year following the termination of his employment
with the Company. Such employment agreements require that the applicable
executive devote substantially all of 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 shareholders. Options covering 488,928
shares of Common Stock were granted pursuant to the 1994 Stock Option Plan (of
which, options covering 106,510 shares were outstanding as of April 1, 1999) 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, 1999, options covering 326,196 shares of Common Stock were
granted pursuant to the 1997 Stock Incentive Plan (326,196 of which were
outstanding as of such date). Additional options covering 254,896 shares of
Common Stock were granted under the 1997 Stock Incentive Plan subject to
shareholder approval of an amendment to the 1997 Stock Incentive Plan permitting
such grant. (See Proposal 2 for text of proposed amendment to the 1997 Stock
Incentive Plan to increase the number of shares covered under this Plan from
375,000 to 1,000,000 shares of Common Stock and to increase the maximum number
of options that may be granted to any one person during any one year from 50,000
to 75,000 and for additional information regarding the Company's 1997 Stock
Incentive Plan.)
During 1998, Messrs. Zimmerman, Laing and Palles were granted options under
the 1997 Stock Incentive Plan with respect to 58,141, 36,107, and 36,107 shares
of Common Stock, respectively. The options granted to Messrs. Zimmerman, Laing
and Palles with respect to 30,000, 15,000 and 15,000 shares of Common Stock,
respectively, have 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. The options granted to Messrs. Zimmerman, Laing and
Palles with respect to 28,141, 21,107 and 21,107 shares of Common Stock,
respectively, have ten-year terms and will vest immediately upon approval of the
Amendment to the 1997 Stock Incentive Plan. (See the table captioned "Options
Grants in 1998" for the exercise price applicable to those options.")
The Non-Employee Director Stock 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, 1999, options covering 58,332 shares of Common Stock
were granted pursuant to the Non-Employee Director Stock Option Plan (all of
which were outstanding as of such date). (See Proposal 3 for text of proposed
amendment to the Non-Employee Director Stock Option Plan to increase the number
of shares covered under this Plan from 100,000 to 150,000 shares of Common Stock
and for additional information regarding the Company's Non-Employee Director
Stock Option Plan.)
With the exception of the grant under the 1994 Stock Option Plan, the grant
of options under the Non-Employee Director Option Plan and the grant of options
under the 1997 Stock Option Plan, the Company has no other option plans.
The Company intends to register under the Securities Act of 1933, as
amended (the "Securities Act"), all shares issuable under the 1994 Stock Option
Plan, all shares issuable under the Non-Employee Director Option Plan and the
375,000 shares of Common Stock initially issuable in connection with Options
granted under the 1997 Stock Incentive Plan, and would expect to amend such
registration to include an additional 625,000 shares of Common Stock if the
Amendment is approved.
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 than 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 or 1998.
Non-Employee Directors' Options
During 1997, Messrs. Aschauer, Lane and Quinn were each 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 under the Company's Non-Employee
Director Stock Option Plan. 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. No
options were granted under the Non-Employee Director Stock Option Plan in 1998.
See Proposal No. 3: Approval of Amendment to the Non-Employee Director Stock
Option Plan.
Report of the Compensation Committee
During 1998 the Compensation Committee (hereinafter, the "Committee"), was
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 1998, the Compensation Committee, on recommendation of the Chairman
and Chief Executive Officer, authorized the granting of options to purchase
299,705 shares of the Company's common stock to fifty-one (51) employees of the
Company under the 1997 Stock Incentive Plan. No awards were made under the
Executive Incentive Compensation Plan for 1998.
During 1998 the Chief Executive Officer received a base salary of $275,000
plus other amounts as provided for in his employment agreement. In addition, the
Chief Executive Officer received a cash bonus of $137,500. 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. Effective January 1,
1999 the Chief Executive Officer's base salary was increased by ten percent
(10%). In determining the amount of such bonus, the Compensation Committee
considered the Chief Executive Officer's leadership role in the Company's
achievement of numerous key business objectives in 1998, including: the
acquisition and integration of three leasing companies and the growth of the
Company's lease portfolio; and the reinitiation by the Company of portfolio
finance activities.
In addition, the Chief Executive Officer requested that he not be included
in the stock option repricing described below.
Report on Repricing of Options
On December 14, 1998, the Board of Directors, on the recommendation of
management, determined to amend the Company's outstanding stock options granted
under the 1997 Stock Incentive Plan, including those held by the executive
offers named in the Summary Compensation Table above, to reduce the exercise
prices of such options. The Board of Directors felt that, in light of the
depressed market prices of the Common Stock in recent months, such reduction was
necessary in order to allow the options to provide the executive officers and
key employees with appropriate incentives. The following table sets forth
certain information regarding the repricing of options granted to any of the
Company's executive officers repriced over the past ten (10) fiscal years.
<PAGE>
Ten Year Option Repricing Summary
<TABLE>
<CAPTION>
Number of
Securities Length of Original
Underlying Market Price Optional Term
Options of Stock at Exercise Remaining at Date
Repriced or Time of Price at Time New of Repricing or
Amended Repricing or of Repricing Exercise Amendment
Name Date (#) Amendment or Amendment Price (Years)
---- ---- --- --------- ------------ ----- -------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Laing 12/15/98 15,000 $6.625 $19.25 $13.00 9.4
Allen P. Palles 12/15/98 15,000 6.625 19.25 13.00 9.4
William J. Erbes 12/15/98 6,942 6.625 13.00 7.06 8.9
Gerard M. Farren 12/15/98 7,500 6.625 13.00 7.06 8.9
</TABLE>
COMPENSATION COMMITTEE
Charles Aschauer
Stanley Green
Curtis Lane
<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, 1998. 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.
<TABLE>
<CAPTION>
11/6/97* 12/31/97 12/31/98
-------- -------- --------
<S> <C> <C> <C>
LINC Capital, Inc. $100 $135 $57
Nasdaq Stock Market - U.S. Index 100 97 137
Nasdaq Financial Index 100 107 104
*The Company's Common Stock began trading publicly on November 6, 1997.
</TABLE>
PROPOSAL NO. 2: APPROVAL OF THE AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN
The 1997 Stock Incentive Plan was adopted by the Company for the purpose of
attracting and retaining officers, directors and key employees. As originally
adopted by the Board and approved by the shareholders in 1997, the 1997 Stock
Incentive Plan provided for the issuance of options with respect to up to
375,000 shares of Common Stock. In 1999, the Compensation Committee and the
Board approved an amendment to the 1997 Stock Incentive Plan (the "1997 Plan
Amendment"), subject to approval by the shareholders, that would increase the
number of shares of Common Stock with respect to which options may be granted
under the 1997 Stock Incentive Plan to 1,000,000 and would increase the number
of options which may be granted to any one person during any one year from
50,000 to 75,000. As of April 1, 1999, the Board has, subject to approval of the
1997 Plan Amendment by the shareholders, granted options with respect to 254,896
shares of Common Stock covered by the 1997 Plan Amendment. The full text of the
1997 Plan Amendment is set forth in Exhibit A1 to this Proxy Statement. For a
summary description of the 1997 Stock Incentive Plan and the 1997 Plan Amendment
and options already granted thereunder, see "Summary of the 1997 Stock Incentive
Plan." The present members of the Board who are Company officers and employees
and the Company's officers may benefit from the approval of the 1997 Plan
Amendment to the extent they are entitled to receive options thereunder. Martin
E. Zimmerman, Chairman of the Board and Chief Executive Officer of the Company,
Robert E. Laing, President and Chief Operating Officer of the Company, and Allen
P. Palles, Executive Vice President and Chief Financial Officer of the Company,
have been granted options under the 1997 Stock Incentive Plan which are subject
to approval by the shareholders of the 1997 Plan Amendment and therefore have an
interest in and will benefit from approval of the 1997 Plan Amendment. The Board
believes that the benefits received by the Company as a result of the incentives
created by the 1997 Stock Incentive Plan and the 1997 Plan Amendment and the
ability of the Company to retain qualified individuals to serve as officers and
key employees of the Company justify the benefit that may be derived by these
individuals. Approval of the 1997 Plan Amendment will require the affirmative
vote of the holders of a majority of the Common Stock in person or represented
by proxy at the Annual Meeting. In the event the 1997 Plan Amendment is not
approved by the shareholders, the options with respect to the 254,896 shares of
Common Stock subject to the approval of the 1997 Plan Amendment will terminate.
The Board recommends a vote FOR the approval of the 1997 Plan Amendment.
SUMMARY OF THE 1997 STOCK INCENTIVE PLAN
The 1997 Stock Incentive Plan (the "1997 Stock Incentive Plan") was adopted
to enable the Company, to attract and retain the services of officers, directors
and key employees considered essential to the success of the Company by offering
them an opportunity to own stock in the Company which will reflect the growth,
development and financial success of the Company.
The full text of the 1997 Plan Amendment is set forth in Exhibit A1 to this
Proxy Statement. For additional information regarding the 1997 Stock Incentive
Plan and the other stock option plans adopted by the Company, see "Proposal No.
3: Approval of the Amendment to the Non-Employee Director Stock Option Plan,"
"Proposal No. 2: Approval of the Amendment to the 1997 Stock Incentive Plan" and
"Proposal No. 1: Election of Directors - Executive Compensation."
The 1997 Stock Incentive Plan, as originally adopted, provided for the
issuance of options with respect to up to 375,000 shares of Common Stock. In
1999, the Board approved the 1997 Plan Amendment, subject to approval by the
shareholders, which would increase the number of shares of Common Stock with
respect to which options may be granted thereunder to 1,000,000 and would
increase the number of options which may be granted to any one person during any
one year from 50,000 to 75,000. The 1997 Plan Amendment to increase the maximum
number of options issuable under the 1997 Stock Incentive Plan and each of the
grants made pursuant to the 1997 Plan Amendment to the 1997 Stock Incentive Plan
are subject to approval by the shareholders of the 1997 Plan Amendment as
described elsewhere in this Proxy Statement.
Pursuant to the 1997 Stock Incentive Plan, key employees (including
officers, whether or not directors, and other employees) may be offered the
opportunity to acquire shares of Common Stock through the grant of stock options
("Options"), including nonqualified stock options ("NQSOs") and incentive stock
options which are entitled to qualify as incentive stock options within the
meaning of Section 422 of the Code ("ISOs"). Under current law, ISOs may only be
granted to employees of the Company itself, and cannot be granted to directors
who are not employees. The Compensation Committee of the Board of Directors (the
"Compensation Committee") may authorize the granting of such Options upon such
terms and conditions and for such periods, up to ten years from the date of the
grant, as it may in its discretion determine. Under the existing terms of the
1997 Stock Incentive Plan, no participant may be granted Options under such plan
in any one year to purchase more than 50,000 shares of Common Stock.
On December 14, 1998 the Board of Directors of the Company approved of a
repricing of the exercise price applicable to all options previously granted
under the 1997 Stock Incentive Plan to employee grantees (including a portion of
the options covered by the amendments that are subject to shareholder approval),
except for options granted to Martin E. Zimmerman. The exercise price for all
such options granted prior to December 14, 1998 to employee grantees other than
Mr. Zimmerman, Mr. Laing and Mr. Palles were repriced to $7.06 per share, which
was the average market price for Company shares during the twenty (20) trading
days prior to December 15, 1998. The exercise price for all options granted
prior to December 15, 1998 to Mr. Laing and Mr. Palles where the exercise price
was $19.25 per share was repriced to $13.00 per share. For additional
information regarding the repricing of options, see Report on Repricing of
Options.
As of April 1, 1999, options with respect to 581,092 shares of Common Stock
have been granted pursuant to the 1997 Stock Incentive Plan 254,896 of which are
subject to approval by the shareholders of the 1997 Plan Amendment). All such
options are NQSOs. No ISO's have been granted under the 1997 Stock Incentive
Plan. The following table sets forth as of April 1, 1999, certain information
with respect to the options granted under the 1997 Stock Incentive Plan. For
additional information regarding such options, including the option term, see
"Proposal No. 1: Election of Directors - Executive Compensation."
<PAGE>
Options Granted under the Stock Incentive Plans
1997 Stock Incentive Plan(1)
<TABLE>
<CAPTION>
No. of Shares Market
Name & Position Underlying Options Exercise Price Value(2)
- --------------- ------------------ -------------- --------
<S> <C> <C> <C>
Martin E. Zimmerman(3)
Chairman and Chief Executive Officer 20,000 $13.00 ($5.25)
30,000 $19.25 ($11.50)
28,141 (3) $7.94 ($0.19)
Robert E. Laing(4)
President and Chief Operating Officer 10,000 $13.00 ($5.25)
15,000 $13.00 ($5.25)
21,107 (3) $7.94 ($0.19)
Allen P. Palles(5)
Executive Vice President and Chief Financial 10,000 $13.00 ($5.25)
Officer 15,000 $13.00 ($5.25)
21,107 (3) $7.94 ($0.19)
William J. Erbes(6)
Senior Vice President 6,942 $7.06 $0.69
10,000 (3) $8.62 ($0.87)
Gerard M. Farren(7)
Senior Vice President 7,500 $7.06 $0.69
5,000 (3) $8.62 ($0.87)
All Current Executive Officers as a Group
(7 persons) 244,797 (4) $10.66 (6) ($2.91) (6)
All Current Non-Executive Officers and employees (5)
as a Group (93 persons) 336,295 $7.49 (6) $0.26 (6)
(1) 254,896 options granted under the 1997 Stock Incetive Plan are subject to approval of the Amendment by the shareholders.
See footnotes (3), (4) and (5).
(2) Market value based on common stock per share basis, closing price on April 1, 1999 or $7.75 minus exercise price.
(3) These options are subject to approval by the shareholders.
(4) Includes 85,355 options in the aggregate granted to Zimmerman, Laing, Palles, Erbes and Farren as described above, plus
10,000 options granted to William F. DeMars and 15,000 options granted to Mark A. Arvin, each of which have been
granted subject to shareholder approval of the Amendment.
(5) Includes 144,541 options subject to approval by the shareholders.
(6) Weighted average values determined as of April 1, 1999.
</TABLE>
The 1997 Stock Incentive Plan provides that option exercise prices may not
be less than the fair market value (as defined in the plan) of the shares of
Common Stock on the date of the grant. The aggregate fair market value
(determined at the time an option is granted) of the shares of Common Stock with
respect to which ISOs are exercisable for the first time by an option holder
during any calendar year may not exceed $100,000. Any option issued under the
1997 Stock Incentive Plan will not be transferable by the holder thereof other
than by will or the laws of descent and distribution by gifting for the benefit
of descendants for estate planning purposes or pursuant to a certified domestic
relations order and may be exercisable during such holder's lifetime only by the
holder or by such holder's guardian, legal representative or permitted
transferee.
Option grants may be made to non-employee directors under the 1997 Stock
Incentive Plan. The Compensation Committee selects the employees and officers to
whom options will be granted and determines the terms of the options and the
number of shares allocated to each such employee. The Committee may provide that
options issued under the 1997 Stock Incentive Plan will be exercisable from time
to time, in installments or otherwise, and may authorize the granting of such
options upon such other terms and conditions and for such periods (up to 10
years from the date of the grant) as it may in its discretion determine. The
exercise price for any option is payable in cash, personal check or shares
already owned (at the fair market value on the date the option is exercised) or
plan awards which the optionee has an immediate right to exercise. All options
held by an optionee which have not become exercisable generally will be
forfeited automatically if the optionee leaves employment for any reason other
than a termination without Cause by the Company (as defined in the 1997 Stock
Incentive Plan), unless provided otherwise in the award of such option. No
option may be exercised more than six (6) months after the optionee terminates
employment with the Company, except if an optionee dies or becomes completely
disabled while an employee or officer, the optionee's vested options will be
exercisable and remain outstanding for one year thereafter.
The 1997 Stock Incentive Plan will be in effect until the tenth anniversary
of its adoption. The Board of Directors may at any time amend, suspend or
terminate the 1997 Stock Incentive Plan; provided, however, that without the
consent of the shareholders, the Compensation Committee may not materially
increase the maximum number of shares of Common Stock subject to Options or
change the class of persons eligible to participate in the plan. No amendment,
suspension or termination will affect awards previously granted without the
consent of the optionee. Any options which had vested prior to a termination
will remain exercisable by the holder thereof until their expiration date,
unless forfeited earlier in accordance with their terms.
In the event of a stock dividend, stock split or combination or other
similar change in the number of issued shares of Common Stock, the Compensation
Committee will make such adjustments to the 1997 Stock Incentive Plan with
respect to the number of unpurchased shares of Common Stock subject to such
plans, the number of shares of Common Stock subject to outstanding Options and
the exercise price specified in outstanding Options as may be determined to be
appropriate and equitable. Furthermore, the Compensation Committee may provide
that, in the event of a merger, consolidation, reorganization, dissolution or
sale or exchange of substantially all of the Company's assets, the Options
outstanding will terminate, subject to adjustment by the Compensation Committee
or by the terms of the plan or agreement of merger, consolidation,
reorganization, dissolution or sale or exchange of such assets.
The Company also expects that additional Options will be granted under the
1997 Stock Incentive Plan if the Amendment is approved.
Federal Income Tax Consequences
At this time the Company has not issued any ISO's under the 1997 Stock
Option Plan. Under present law, upon the grant and exercise of an ISO under the
1997 Stock Incentive Plan, an optionee will not recognize taxable income for
Federal income tax purposes. However, the amount by which the fair market value
of the shares of Common Stock at the time of exercise exceeds the exercise price
will be treated as an adjustment to taxable income for alternative minimum tax
purposes. If the optionee does not dispose of the shares of Common Stock so
acquired until more than one year after its receipt (and until more than two
years after the ISO was granted), gain or loss recognized on the subsequent
disposition of the shares of Common Stock will be treated as long-term capital
gain or loss. Such gain or loss is computed as the difference between the
exercise price and the sale price. If the shares of Common Stock are disposed of
prior to those times, the optionee will recognize compensation income taxable as
ordinary income for Federal income tax purposes in an amount equal to the lesser
of (i) the excess of the fair market value of the shares of Common Stock on the
date of exercise over the exercise price or (ii) the amount of gain recognized
if the disposition is a taxable sale or exchange. To the extent individual
optionees qualify for capital gain treatment, the Company (or the applicable
employer company) will not be entitled to a deduction for Federal income tax
purposes in connection with the grant or exercise of the ISO. In other cases,
the Company (or the employer company) will be entitled to a Federal income tax
deduction at the same time and in the same amount that the optionee recognizes
compensation income taxable as ordinary income for Federal income tax purposes.
Currently, the maximum tax rate imposed on the net long-term capital gains
of individuals, trusts and estates is 20%. Notwithstanding the capital gains
treatment described above, the amount by which the fair market value of the
shares of Common Stock at the time of exercise exceeds the exercise price of an
ISO will be treated as an adjustment to the optionee's taxable income for
alternative minimum tax purposes. This adjustment to taxable income may be
significant to an optionee. The optionee may be entitled to a credit against his
or her regular tax liability in subsequent years for the amount of alternative
minimum tax liability incurred in the year of exercise attributable to such
adjustment. Moreover, solely for the purpose of determining alternative minimum
tax liability, the basis of the shares of Common Stock will be increased by the
amount of such adjustment.
At this time all options granted under the 1997 Stock Incentive Plan are
NQSOs. All options granted under the Non-Employee Director Stock Option Plan are
NQSOs. Under present law, an optionee will not recognize taxable income for
Federal income tax purposes upon the grant of an NQSO. Upon the exercise of an
NQSO, the optionee will recognize compensation income taxable as ordinary income
in an amount equal to the excess of the fair market value of the shares
acquired, determined at the time of exercise, over the exercise price. The
Company (or the applicable employer company) will be entitled to a Federal
income tax deduction to the extent the optionee recognizes compensation income
taxable as ordinary income for Federal income tax purposes. Special rules govern
the recognition of income by optionees subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
For taxable years beginning on or after January 1, 1994, Section 162(m) of
the Code provides that a publicly held corporation may not deduct compensation
paid to any one of certain specified officers in excess of $1 million per year
unless such compensation qualifies as "performance-based" compensation within
the meaning of that Section. Therefore, if the aggregate taxable income
recognized in any year by certain of the executive officers of the Company,
including any income recognized upon the exercise of Options that do not qualify
as "performance-based" and any bonuses, exceeds $1 million, the excess generally
will not be deductible by the Company except to the extent that the excess
qualifies as performance-based compensation.
For financial accounting purposes, under GAAP as presently in effect, the
grant or exercise of an Option under the Stock Incentive Plans will not result
in a charge to the Company's net income because the exercise price will be at
least the fair market value of the shares of Common Stock subject thereto at the
date of grant.
PROPOSAL NO. 3: APPROVAL OF THE AMENDMENT TO THE NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN
The Non-Employee Director Stock Option Plan (the "Director Plan") was
adopted by the Company for the purpose of attracting and retaining non-employee
directors. As originally adopted by the Board and approved by the shareholders
in 1997, the Director Plan provided for the issuance of options with respect to
up to 100,000 shares of Common Stock. In 1999, the Compensation Committee and
the Board approved an amendment to the Director Plan (the "Director Plan
Amendment"), subject to approval by the shareholders, that would increase the
number of shares of Common Stock with respect to which options may be granted
under the Director Plan to 150,000. As of April 1, 1999, the Board has granted
58,332 options with respect to the 100,000 shares of Common Stock presently
covered by the Director Plan. The full text of the Director Plan Amendment is
set forth in Exhibit A2 to this Proxy Statement. For a summary description of
the Director Plan and options already granted thereunder, see "Summary of the
Director Plan." The present members of the Board who are non-employees of the
Company may benefit from the approval of the Director Plan Amendment to the
extent they are entitled to receive options thereunder. The Board believes that
the benefits received by the Company as a result of the incentives created by
the Director Plan and the Director Plan Amendment and the ability of the Company
to retain qualified individuals to serve as non-employee directors of the
Company justify the approval of the Director Plan Amendment. Approval of the
Director Plan Amendment will require the affirmative vote of the holders of a
majority of the Common Stock in person or represented by proxy at the Annual
Meeting.
The Board recommends a vote FOR the approval of the Director Plan
Amendment.
SUMMARY OF THE NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Director Plan was adopted to enable the Company, to attract and retain
the services of non-employee directors considered essential to the success of
the Company by offering them an opportunity to own stock in the Company which
will reflect the growth, development and financial success of the Company.
The full text of the Director Plan Amendment is set forth in Exhibit A2 to
this Proxy Statement. For additional information regarding the Director Plan and
the other stock option plans adopted by the Company, see "Proposal No. 3:
Approval of the Amendment to the Non-Employee Director Stock Option Plan,"
"Proposal No. 2: Approval of the Amendment to the 1997 Stock Incentive Plan,"
and "Proposal No. 1: Election of Directors - Non-Employee Directors' Options."
The Director Plan, as originally adopted, provided for the issuance of
options with respect to up to 100,000 shares of Common Stock. In 1999, the Board
approved an amendment to the Director Plan, subject to approval by the
shareholders, which would increase the number of shares of Common Stock with
respect to which options may be granted thereunder to 150,000.
Pursuant to the Director Plan, non-employee directors of the Company may be
offered the opportunity to acquire shares of Common Stock through the grant of
stock options ("Options"). The Board of Directors may authorize the granting of
such Options upon such terms and conditions and for such periods, up to ten
years from the date of the grant, as it may in its discretion determine.
As of April 1, 1999, options with respect to 58,332 shares of Common Stock
have been granted pursuant to the Director Plan. The following table sets forth,
as of April 1, 1999, certain information with respect to the options granted
under the Director Plan. For additional information regarding such options,
including the option term, see "Proposal No. 1: Election of Directors
Non-Employee Directors Options."
<PAGE>
<TABLE>
<CAPTION>
Options Granted under the Non-Employee Director Stock Option Incentive Plan
No. of Shares Market
Name & Position Underlying Options Exercise Price Value(1)
- --------------- ------------------ -------------- --------
<S> <C> <C> <C>
Charles J. Aschauer, Jr.
Director 13,333 $13.00 ($5.25)
Stanley Green
Director 18,333 $13.00 ($5.25)
Curtis S. Lane
Directorr 13,333 $13.00 ($5.25)
Terrence J. Quinn
Director 13,333 $13.00 ($5.25)
(1) Market value based on common stock per share basis, closing price on April 1, 1999 or $7.75 minus exercise price.
</TABLE>
The Director Plan provides that option exercise prices may not be less than
the Fair Market Value (as defined in the plan) of the shares of Common Stock on
the date of the grant. Any option issued under the Director Plan will not be
transferable by the holder thereof other than by will or the laws of descent and
distribution by gifting for the benefit of descendants for estate planning
purposes or pursuant to a certified domestic relations order and may be
exercisable during such holder's lifetime only by the holder or by such holder's
guardian, legal representative or permitted transferee.
Option grants may be made only to non-employee directors under the Director
Plan. The Board of Directors of the Company, upon consultation with and upon the
recommendation of the Chairman of the Board, selects the non-employee directors
to whom options will be granted and determines the terms of the options and the
number of shares allocated to each such non-employee director. The exercise
price for any option is payable in cash, personal check or shares already owned
(valued at the fair market value on the date the option is exercised) or plan
awards which the optionee has an immediate right to exercise. In the event of
death or "disability" of an optionee, or a "change of control" of the Company,
options may become immediately and fully exercisable. All options held by an
optionee which have not become exercisable generally will be forfeited
automatically if the optionee ceases to be a director of the Company for any
reason, unless provided otherwise in the award of such option. No option may be
exercised more than six (6) months after the optionee ceases to be a director of
the Company, except if an optionee dies or becomes completely disabled while a
non-employee director, the optionee's vested options will be exercisable and
remain outstanding for six (6) months thereafter.
The Director Plan will be in effect until the tenth anniversary of its
adoption. The Board of Directors may at any time amend, suspend or terminate the
Director Plan. No amendment, suspension or termination will affect awards
previously granted without the consent of the optionee. Any options which had
vested prior to a termination will remain exercisable by the holder thereof
until their expiration date, unless forfeited earlier in accordance with their
terms.
In the event of a stock dividend, stock split or combination or other
similar change in the number of issued shares of Common Stock, the Board of
Directors of the Company will make such adjustments to the Director Plan with
respect to the number of unpurchased shares of Common Stock subject to such
plans, the number of shares of Common Stock subject to outstanding Options and
the exercise price specified in outstanding Options as may be determined to be
appropriate and equitable. Furthermore, the Board of Directors of the Company
may provide that, in the event of a merger, consolidation, reorganization,
dissolution or sale or exchange of substantially all of the Company's assets,
the Options outstanding will terminate, subject to adjustment by the Board of
Directors of the Company or by the terms of the plan or agreement of merger,
consolidation, reorganization, dissolution or sale or exchange of such assets.
In the event of a change of control, options may become immediately and fully
exercisable at the discretion of the Board of Directors of the Company.
The Company expects that additional Options will be granted under the
Director Plan if the Director Plan Amendment is approved. See "Proposal No. 2:
Approval of the Amendment to the 1997 Stock Incentive Plan - Federal Income Tax
Consequences for tax consequences applicable to options granted under the
Non-Employee Director Stock Option Plan."
PROPOSAL NO. 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon recommendation by the Audit Committee, the Board of Directors has
appointed KMPG LLP as independent auditors for the year ending December 31,
1999. The Company has been advised that KMPG LLP has no relationship with the
Company or its subsidiaries other than that arising from their role as the
Company's auditors.
Representatives of KMPG LLP are expected to be present at the 1999 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 1998.
The Board recommends a vote FOR the appointment of KMPG LLP as auditor.
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.
- --------------------------------------------------------------------------------
SUBMISSION OF SHAREHOLDER PROPOSALS
All proposals of shareholders intended to be presented at the 2000 Annual
Meeting of Shareholders must be received by the Company at its executive offices
no later than the close of business on December 30, 1999 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 six 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) proposals 2, 3 and 4, and (iii) 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.
<PAGE>
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 28, 1999
<PAGE>
EXHIBIT A-1
TO PROXY STATEMENT
TEXT OF AMENDMENT TO 1997 STOCK INCENTIVE PLAN
AMENDMENT NO. 1 TO LINC CAPITAL, INC.
1997 STOCK INCENTIVE PLAN
1. Purpose of the Amendment The LINC CAPITAL, INC., 1997 STOCK INCENTIVE PLAN
------------------------
(hereinafter referred to as the "Plan") is intended to provide a means whereby
Employees of LINC CAPITAL, INC., and its Related Corporations (the "Company")
may sustain a sense of proprietorship and personal involvement in the continued
development and financial success of the Company, and to encourage them to
remain with and devote their best efforts to the business of the Company,
thereby advancing the interests of the Company and its shareholders.
Accordingly, the Company may permit certain Employees to acquire Shares or
otherwise participate in the financial success of the Company, on the terms and
conditions established in the Plan.
The purpose of Amendment No. 1 to the Plan (the "Amendment") is to (a)
increase the number of Shares that may be obtained by Employees under the Plan
from Three Hundred Seventy-Five Thousand (375,000) Shares to One Million
(1,00,000) Shares and (b) to increase the maximum number of Shares that may be
granted to any one Employee pursuant to an award for any calendar year from a
maximum of Fifty Thousand (50,000) Shares to a maximum of Seventy-Five Thousand
(75,000) Shares.
2. Text of the Amendment All capitalized terms used in this Amendment shall have
---------------------
the same meaning as set forth in the Plan. Section 4 of the Plan captioned
"Shares Subject To the Plan" is hereby amended by (a) deleting the reference to
"Three Hundred Seventy-Five Thousand (375,000) Shares" in the first sentence and
inserting the reference to "One Million (1,00,000) Shares" in its place and (b)
deleting the reference to "Fifty Thousand (50,000) Shares" in the third sentence
and inserting the reference to "Seventy-Five Thousand (75,000) Shares" in its
place so that Section 4 of the Plan shall read in its entirety as follows:
"4. Shares Subject to the Plan. The aggregate number of Shares that may
---------------------------
be obtained by Employees under the Plan shall be "One Million
(1,00,000) Shares. Any Shares that remain unissued at the termination
of the Plan shall cease to be subject to the Plan, but until
termination of the Plan, LINC Capital, Inc. shall at all times make
available sufficient Shares to meet the requirements of the Plan. The
maximum number of Shares that may be granted to any one Employee
pursuant to an award for any calendar year may not exceed Seventy-Five
Thousand (75,000) Shares. The limitation set forth in the preceding
sentence shall be applied in a manner which will permit compensation
generated under the Plan to constitute "performance-based" compensation
for purposes of Section 162(m) of the Code, including, without
limitation, counting against such maximum number of Shares, to the
extent required under Section 162(m) of the Code and all applicable
interpretive authority thereunder, any Shares subject to Options that
are canceled or repriced. To the extent that an Option lapses or the
rights of an Optionee terminate, any Shares subject to such Option
shall again be made available for the grant of an Option to the extent
permitted under Rule 16b-3."
3. Defined Terms in the Amendment All capitalized terms used in this Amendment
------------------------------
shall have the same meaning as set forth in the Plan.
4. Effective Date of the Amendment The Amendment shall be come effective upon
--------------------------------
approval of the shareholders of the Company by the affirmative vote of the
majority of shares present in person or by proxy and entitled to vote on the
matter.
<PAGE>
EXHIBIT A-2
TO PROXY STATEMENT
TEXT OF AMENDMENT TO NON - EMPLOYEE DIRECTOR STOCK OPTION PLAN
AMENDMENT NO. 1 TO LINC CAPITAL, INC.
NON - EMPLOYEE DIRECTOR STOCK OPTION PLAN
2. Purpose of the Amendment The LINC CAPITAL, INC., NON-EMPLOYEE DIRECTOR STOCK
------------------------
OPTION PLAN (hereinafter referred to as the "Plan") is intended to provide a
means whereby Non-Employee Directors of LINC CAPITAL, INC., and its Related
Corporations (the "Company") may sustain a sense of proprietorship and personal
involvement in the continued development and financial success of the Company,
and to encourage them to remain with and devote their best efforts to the
business of the Company, thereby advancing the interests of the Company and its
shareholders. Accordingly, the Company may permit certain Non-Employee Directors
to acquire Shares or otherwise participate in the financial success of the
Company, on the terms and conditions established under the Plan.
The purpose of Amendment No. 1 to the Plan (the "Amendment") is to increase
the number of Shares that may be obtained by Non-Employee Directors under the
Plan from One Hundred Thousand (100,000) Shares to One Hundred Fifty Thousand
(150,000) Shares.
2. Text of the Amendment All capitalized terms used in this Amendment shall have
---------------------
the same meaning as set forth in the Plan. Section 4 of the Plan captioned
"Shares Subject To the Plan" is hereby amended by (a) deleting the reference to
"One Hundred Thousand (100,000) Shares" in the first sentence and inserting the
reference to "One Hundred Fifty Thousand (150,000) Shares" in its place so that
Section 4 of the Plan shall read in its entirety as follows
"4. Shares Subject to the Plan. The aggregate number of Shares that may
---------------------------
be obtained by Non-Employee Directors under the Plan shall be "One
Hundred Fifty Thousand (150,000) Shares. Any Shares that remain
unissued at the termination of the Plan shall cease to be subject to
the Plan, but until termination of the Plan, LINC Capital, Inc. shall
at all times make available sufficient Shares to meet the requirements
of the Plan. To the extent that an Option lapses or the rights of an
Optionee terminate, any Shares subject to such Option shall again be
made available for the grant of an Option to the extent permitted under
Rule 16b-3."
3. Defined Terms in the Amendment All capitalized terms used in this Amendment
shall have the same meaning as set forth in the Plan.
4. Effective Date of the Amendment The Amendment shall be come effective upon
--------------------------------
approval of the shareholders of the Company by the affirmative vote of the
majority of shares present in person or by proxy and entitled to vote on the
matter.
<PAGE>
LINC CAPITAL, INC.
Proxy is Solicited on Behalf of the Board of Directors for the
Annual Meeting of Stockholders
May 26, 1999
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 Wednesday, May 26, 1999 at 10:00 A.M., Central Daylight Time, and at any and
all adjournments or postponements thereof.
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, 2, 3 and 4.
1. ELECTION OF DIRECTORS
For Withhold For All
Martin E. Zimmerman, Robert E. All All Except
Laing, Allen P. Palles, Terrence J. [_] [_] [_]
Quinn,Curtis S. Lane, Stanley Green
(Instruction: To withhold authority
to vote for any nominee(s), write
the name(s) of such nominee(s) below.
-------------------------------------
2. PROPOSAL to approve an Amendment to For Withhold For All
the 1997 Stock Incentive Plan to All All Except
increase the number of shares [_] [_] [_]
available to 1,000,000 and to
increase the maximum options
grantable to any one person per
year to 75,000 shares.
3. PROPOSAL to approve an Amend- For Against Abstain
ment to the Non-Employee Director [_] [_] [_]
Stock Option Plan to increase the
Number of shares available to
150,000.
4. PROPOSAL to ratify the selection of For Against Abstain
KPMG LLP to serve as to serve as [_] [_] [_]
the Company's independent
auditors for 1999.
Receipt of the Notice of Annual Meeting of Stockholders and proxy statement is
herby 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:_____________________________________________________
