SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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Capital Southwest Corporation
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June 2, 2000
To the Shareholders of Capital Southwest Corporation:
The Annual Meeting of Shareholders of our Corporation will be held on
Monday, July 17, 2000, at 10:00 a.m. in the North Dallas Bank Tower Meeting Room
(First Floor), 12900 Preston Road, Dallas, Texas.
A Notice of the Annual Meeting, a Proxy and a Proxy Statement
containing information about matters to be acted upon are enclosed. In addition,
the Capital Southwest Corporation Annual Report for the fiscal year ended March
31, 2000 is enclosed to provide information regarding the performance of the
Corporation during the past year. Holders of Common Stock are entitled to vote
on the basis of one vote for each share held. If you attend the Annual Meeting,
you retain the right to vote in person even though you previously mailed the
enclosed Proxy.
It is important that your shares be represented at the meeting whether
or not you are personally in attendance. Please review the Proxy Statement and
sign, date and return the enclosed Proxy at your earliest convenience. I look
forward to meeting with you and, together with our directors and officers,
discussing the Corporation's business. I hope you will be present.
Very truly yours,
William R. Thomas
Chairman of the Board
and President
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 17, 2000
To the Shareholders of Capital Southwest Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Capital
Southwest Corporation, a Texas corporation (the "Corporation"), will be held on
Monday, July 17, 2000, at 10:00 a.m., Dallas time, in the Meeting Room (First
Floor) of the North Dallas Bank Tower, 12900 Preston Road, Dallas, Texas, for
the following purposes:
1. To elect five directors to serve until the next Annual Meeting of
Shareholders or until their respective successors shall be elected and
qualified.
2. To ratify the appointment of KPMG LLP as independent auditors for the
Corporation.
3. To transact such other business as may properly come before the meeting and
any adjournment thereof.
Only holders of Common Stock of the Corporation of record at the close of
business on June 1, 2000 will be entitled to notice of, and to vote at, the
meeting and any adjournment thereof.
If you do not expect to attend in person, please sign, date and return the proxy
at your earliest convenience in the enclosed envelope. No postage is required
for mailing in the United States. A prompt return of your proxy will be
appreciated as it will save the expense of further mailings.
By Order of the Board of Directors
TIM SMITH
Secretary
Dallas, Texas
June 2, 2000
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 17, 2000
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Capital Southwest Corporation, a Texas corporation
(the "Corporation"), of proxies to be voted at the Annual Meeting of
Shareholders to be held on July 17, 2000 or any adjournment thereof. The date on
which this Proxy Statement and the enclosed form of proxy are first being sent
or given to shareholders of the Corporation is on or about June 2, 2000.
PURPOSES OF THE MEETING
The Annual Meeting of the Shareholders is to be held for the purposes
of (1) electing five persons to serve as directors of the Corporation until the
next Annual Meeting of Shareholders, or until their respective successors shall
be elected and qualified (see ELECTION OF DIRECTORS); (2) ratifying the
appointment by the Board of Directors of KPMG LLP as independent auditors for
the Corporation (see APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS); and (3)
transacting such other business as may properly come before the meeting or any
adjournment thereof.
To be elected a director, each nominee must receive the favorable vote
of the holders of a majority of the shares of Common Stock entitled to vote and
represented at the Annual Meeting. In order to ratify the appointment of KPMG
LLP as independent auditors for the Corporation for the year ending March 31,
2001, the ratification proposal must receive the favorable vote of a majority of
the shares of Common Stock entitled to vote and represented at the Annual
Meeting.
The Board of Directors unanimously recommends that the shareholders
vote FOR the election as directors of the persons named under ELECTION OF
DIRECTORS and FOR the ratification of the appointment of KPMG LLP as independent
auditors.
VOTING AT THE MEETING
The record date for holders of Common Stock entitled to notice of, and
to vote at, the Annual Meeting of Shareholders is the close of business on June
1, 2000, at which time the Corporation had outstanding and entitled to vote at
the meeting 3,815,051 shares of Common Stock.
1
The presence, in person or by proxy, of the holders of a majority of
the shares of Common Stock outstanding and entitled to vote at the Annual
Meeting is necessary to constitute a quorum. In deciding all questions, a
shareholder shall be entitled to one vote, in person or by proxy, for each share
of Common Stock held in his name at the close of business on the record date.
Shareholders who are present, in person or by proxy, but abstain from voting on
any item will be counted as present at the meeting, but not voting on any such
item. Similarly, nominees (such as broker-dealers) who are present, in person or
by proxy, but abstain or refrain from voting on any item, will be counted as
present at the meeting, but not voting on any such item.
Each proxy delivered to the Corporation, unless the shareholder
otherwise specifies therein, will be voted FOR the election as directors of the
persons named under ELECTION OF DIRECTORS (PROPOSAL 1) and FOR the ratification
of the appointment by the Board of Directors of KPMG LLP as independent auditors
(PROPOSAL 2). In each case where the shareholder has appropriately specified how
the proxy is to be voted, it will be voted in accordance with his specification.
As to any other matter or business which may be brought before the meeting, a
vote may be cast pursuant to the accompanying proxy in accordance with the
judgment of the person or persons voting the same, but neither management nor
the Board of Directors of the Corporation knows of any such other matter or
business. Any shareholder has the power to revoke his proxy at any time insofar
as it is then not exercised by giving notice of such revocation, either
personally or in writing, to the Secretary of the Corporation or by the
execution and delivery to the Corporation of a new proxy dated subsequent to the
original proxy.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock of the Corporation as of May 1, 2000 by (1)
each person, so far as is known to the management of the Corporation, who is the
beneficial owner (as that term is defined in the rules and regulations of the
Securities and Exchange Commission) of more than 5% of the outstanding Common
Stock, (2) each executive officer listed in the Summary Compensation Table, (3)
each director of the Corporation, and (4) all directors and executive officers
of the Corporation as a group. Unless otherwise indicated below, each of the
persons named in the table has sole voting and investment power with respect to
the shares indicated to be beneficially owned.
Name and Address Shares Owned Percent
of Beneficial Owner Beneficially of Class
------------------- ------------ --------
William R. Thomas
12900 Preston Rd., Suite 700
Dallas, Texas 75230....................... 960,473 (1)(2) 25.2%
2
Name and Address Shares Owned Percent
of Beneficial Owner Beneficially of Class
------------------- ------------ --------
Tim Smith
12900 Preston Rd., Suite 700
Dallas, Texas 75230...................... 402,031 (2)(3) 10.5
First Manhattan Company
437 Madison Avenue
New York, New York 10022................. 285,493 (4) 7.5
U.S. Trust Corporation
114 West 47th Street
New York, New York 10036.................. 220,530 (5) 5.8
Gary L. Martin............................ 149,713 (2)(3) 3.9
Patrick F. Hamner......................... 127,208 (2)(3) 3.3
Graeme W. Henderson....................... 4,700 (6) 0.1
James M. Nolan............................ 4,000 0.1
John H. Wilson............................ 1,000 -
All directors and executive officers
as a group (7 persons).................... 1,141,906 (7) 29.6
(1) Mr. Thomas has sole voting and investment power with respect to
584,842 shares, which include 49,130 shares owned by two of his children and
206,525 shares owned by Thomas Heritage Partners, Ltd., in which Mr. Thomas has
a 50.7% limited partnership interest. Mr. Thomas holds a majority interest in
and is President and sole manager of Thomas Heritage Company, LLC, the sole
general partner of Thomas Heritage Partners, Ltd.
(2) Messrs. Smith and Thomas constitute a majority of the trustees of
certain trusts pursuant to employee stock ownership plans for employees of the
Corporation and its wholly-owned subsidiaries owning 287,487 shares, with the
power as trustees to vote such shares. Messrs. Smith and Thomas also participate
in the power to direct the trustees in the voting of 88,144 shares owned by a
trust pursuant to a pension plan for employees of the Corporation and certain
wholly-owned subsidiaries of the Corporation. Accordingly, Messrs. Smith and
Thomas have shared voting and investment power with respect to the 375,631
shares, representing 9.8% of the outstanding Common Stock of the Corporation,
owned by the aforementioned trusts. Under the rules and regulations of the
Securities and Exchange Commission, Messrs. Smith and Thomas are both deemed to
be the beneficial owners of such 375,631 shares, which are included in the
shares beneficially owned by Messrs. Smith and Thomas.
3
Mr. Martin serves as trustee, with Messrs. Smith and Thomas, of one
of the aforementioned trusts owning 43,444 shares. Accordingly, Mr. Martin has
shared voting and investment power with respect to the 43,444 shares. Under the
rules and regulations of the Securities and Exchange Commission, Mr. Martin is
deemed to be the beneficial owner of such 43,444 shares, which are included in
the shares beneficially owned by Mr. Martin.
Of the shares owned by trusts pursuant to the aforementioned employee
stock ownership plans, 3,825 and 1,076 were allocated to Messrs. Martin and
Smith, respectively, all of which were vested.
Mr. Hamner, with Messrs. Smith and Thomas, participates in the power
to direct the trustees in the voting of 88,144 shares owned by one of the
aforementioned trusts. Under the rules and regulations of the Securities and
Exchange Commission, Mr. Hamner is deemed to be the beneficial owner of such
88,144 shares, which are included in the shares beneficially owned by Mr.
Hamner.
(3) Includes 14,000 shares each subject to immediately exercisable
stock options held by Messrs. Hamner, Martin and Smith.
(4) As reported to the Corporation by First Manhattan Co., that
partnership has sole voting and dispositive power with respect to 3,000 shares,
shared voting power with respect to 271,053 shares and shared dispositive power
with respect to 282,493 shares by reasons of advisory and other relationships
with the persons who own the shares.
(5) As reported to the Corporation by U.S. Trust Corporation, that
corporation has shared dispositive power and shared voting power with respect to
220,530 shares via either a trust/fiduciary capacity and/or a portfolio
management/agency relationship with the persons who own the shares.
(6) Includes 1,500 shares held by a retirement trust for the benefit of
Mr. Henderson.
(7) Includes (a) the shares owned by the partnership and trusts
referred to in Notes (1) and (2), respectively, to the above table, (b) 42,000
shares subject to immediately exercisable stock options (including those
referred to in Note (3) to the above table), (c) 1,500 shares held in a
retirement trust for the benefit of Mr. Henderson and (d) 49,130 shares owned by
immediate family members of Mr. Thomas.
ELECTION OF DIRECTORS (PROPOSAL 1)
Five directors are proposed to be elected at the meeting to serve until
the next Annual Meeting of Shareholders or until their respective successors
shall be elected and qualified. The persons named in the accompanying form of
proxy intend to vote such proxy for the election of the nominees named below as
4
directors of the Corporation to serve until the next Annual Meeting of
Shareholders or until their respective successors shall be elected and
qualified, unless otherwise properly indicated on such proxy. If any nominee
shall become unavailable for any reason, the persons named in the accompanying
form of proxy are expected to consult with the Board of Directors of the
Corporation in voting the shares represented by them at the Annual Meeting. The
Board of Directors has no reason to doubt the availability of any of the
nominees and no reason to believe that any of the nominees will be unable or
unwilling to serve the entire term for which election is sought.
The names of the nominees, along with certain information concerning
them, are set forth below.
GRAEME W. HENDERSON
Mr. Henderson, age 66, has been a director of the Corporation since
1976 and previously served as a director of the Corporation from 1962 to 1964.
Mr. Henderson has been self-employed as a private investor and consultant for
more than five years. He served as a director of Starwood Hotels and Resorts
Worldwide, Inc. from 1986 to February 1999.
*GARY L. MARTIN
Mr. Martin, age 53, has been a director of the Corporation since July
1988 and has served as Vice President of the Corporation since July 1984. He
previously served as Vice President of the Corporation from 1978 to 1980. Since
1980, Mr. Martin has served as President of The Whitmore Manufacturing Company,
a wholly-owned subsidiary of the Corporation.
JAMES M. NOLAN
Mr. Nolan, age 66, has been a director of the Corporation since July
1980. He has been self-employed as a private investor and consultant to the
telecommunications industry since 1978 and served as a director of DSC
Communications Corporation from 1981 to 1996.
*WILLIAM R. THOMAS
Mr. Thomas, age 71, has served as Chairman of the Board of Directors of
the Corporation since July 1982 and President of the Corporation since 1980. In
addition, he has been a director of the Corporation since 1972 and was
previously Senior Vice President of the Corporation from 1969 to 1980. Mr.
Thomas also serves as a director of Alamo Group Inc., Encore Wire Corporation,
Mail-Well, Inc. and Palm Harbor Homes, Inc.
JOHN H. WILSON
Mr. Wilson, age 57, has been a director of the Corporation since July
1988. He has been President of U. S. Equity Corporation, a venture capital
investment firm, since 1983 and President of Whitehall Corporation from 1995 to
1998. Mr. Wilson also serves as a director of Encore Wire Corporation and Palm
Harbor Homes, Inc.
5
* Messrs. Martin and Thomas are "interested persons" as that term is defined
in Section 2(a)(19) of the Investment Company Act of 1940.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires officers and directors of the Corporation and persons who beneficially
own more than ten percent of the Corporation's common stock 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 Corporation with copies of all Section 16(a) forms they file. Based
solely upon a review of the copies of such forms furnished to the Corporation,
or written representations that no Form 5 filings were required, the Corporation
believes that each of its officers, directors and greater than ten percent
beneficial owners complied with all Section 16(a) filing requirements applicable
to them during the year ended March 31, 2000.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Corporation has established an Audit
Committee and a Compensation Committee to assist the Board in carrying out its
duties. The Audit Committee monitors the Company's financial reports and
accounting practices to ascertain that they are within acceptable limits of
sound practice; reviews audit reports submitted by the Corporation's independent
auditors; makes recommendations to the Board of Directors regarding the
engagement of the independent auditors for audit and non-audit services;
evaluates the independence of the auditors; and reviews with the independent
auditors the fee, scope and timing of audit and non-audit services. The
Compensation Committee periodically reviews the compensation, employee benefit
plans and other fringe benefits paid to or provided for officers and directors
of the Corporation and approves the annual salaries and bonuses of officers of
the Corporation. The Corporation does not have a Nominating Committee.
Messrs. Graeme W. Henderson, James M. Nolan and John H. Wilson are
presently members of both the Audit and Compensation Committees. During the
fiscal year of the Corporation ended March 31, 2000, thirteen meetings
(including eight telephone meetings) of the Board of Directors were held. In
addition, two meetings (including one telephone meeting) of the Compensation
Committee and two meetings of the Audit Committee were held. Each of the
directors attended at least 75% of the aggregate of (1) the total number of
meetings of the Board of Directors and (2) the total number of meetings held by
all committees on which he served.
6
PERFORMANCE GRAPH
The following graph compares the Corporation's cumulative total
stockholder return during the last five years (based on the market price of the
common stock and assuming reinvestment of all dividends and tax credits on
retained long-term capital gains) with the Total Return Index for the Nasdaq
Stock Market (U.S. Companies) and with the Total Return Index for Nasdaq
Financial Stocks, both of which indices have been prepared by the Center for
Research in Security Prices at the University of Chicago.
Comparison of Five Year Cumulative Total Returns
[Graph omitted]
Nasdaq Total Return (U.S.) Nasdaq Financial Stocks Capital Southwest Corporation
1995 100.000 100.000 100.000
1996 135.795 137.799 169.453
1997 150.952 177.516 197.909
1998 228.876 275.790 281.456
1999 309.191 248.436 220.191
2000 574.039 236.548 169.494
7
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation of Directors
In addition to reimbursement of travel expenses for attendance at board
meetings, a director who is not an employee of the Corporation receives an
annual fee of $16,000 for service as a director and $6,000 for service as
chairman of a committee of the Board of Directors. In addition, a director who
is not an employee of the Corporation receives $1,000 for each directors'
meeting (excluding telephone meetings) and $500 for each committee meeting
attended, subject to a maximum of $6,000 per year in aggregate meeting fees.
Directors' meetings are normally held on a quarterly basis.
Compensation Committee Interlocks and Insider Participation
None of the Corporation's executive officers served as a member of the
Compensation Committee of the Board of Directors or as a director of any other
entity, one of whose executive officers served as a member of the Compensation
Committee of the Corporation's Board of Directors.
Report of the Compensation Committee
The goals of the Corporation's compensation program are to attract,
retain and motivate competent executive officers who have the experience and
ability to contribute materially to the success of the Corporation's venture
capital and business development activities. The individual judgments made by
the Compensation Committee are subjective and are based largely on the
Committee's perception of each executive's contribution to both the past
performance and the long-term growth potential of the Corporation. The principal
elements of compensation for executive officers are base salary, discretionary
bonus payments, stock options granted under the Stock Option Plan and
contributions pursuant to the Employee Stock Ownership Plan.
Base salaries were determined by the Committee in July 1999 for each of
the executive officers on an individual basis, taking into consideration
individual contributions to the Corporation's performance, length of tenure with
the Corporation, compensation levels for comparable positions and internal
equities among positions. In addition to base salaries, certain executive
officers received bonus payments in March 2000, the amounts of which were
determined by the Committee on a discretionary basis, taking into consideration
individual performance, with particular emphasis on contributions to the
Corporation's achievement of long-term investment objectives.
In July 1999, the Committee established the base salary of the
Corporation's chief executive officer, William R. Thomas, at $250,000 per annum,
a continuation of the level established in July 1993. The compensation level for
Mr. Thomas was determined on the basis of the factors cited above, all of which
are applicable to him as well as other executive officers. Other relevant
factors considered by the Committee were the Corporation's performance and Mr.
Thomas' role in defining and accomplishing the Corporation's long-term
investment objectives and administering its investment management activities. At
Mr. Thomas' request, he was not awarded a year-end bonus in March 2000.
8
The Corporation's 1999 Stock Option Plan was approved by the
shareholders in 1999 and will expire on April 19, 2009. The Stock Option Plan,
which provides for incentive stock options and non-qualified stock options,
authorizes the granting of options to purchase an aggregate of 140,000 shares of
common stock. All regular salaried employees of the Corporation or officers of
the Corporation who are regular salaried employees of one of its subsidiaries,
are eligible to receive options. In July 1999, the Committee granted incentive
stock options to four employees to purchase an aggregate of 32,000 shares at
$77.00 per share (the fair market value on the date of grant) and incentive
stock options to William R. Thomas, the Corporation's chief executive officer,
to purchase 6,000 shares at $84.70 per share (110% of the fair market value on
the date of grant). The remaining 102,000 authorized options have not been
granted.
An additional equity incentive is provided by the Corporation's
Employee Stock Ownership Plan, to which the Corporation contributed 8.733% of
each participating employee's covered compensation for the fiscal year ended
March 31, 2000.
Compensation Committee
James M. Nolan, Chairman
Graeme W. Henderson
John H. Wilson
Summary Compensation Table
The following table sets forth summary information regarding the
compensation (excluding retirement benefits) earned by or paid to William R.
Thomas, Chairman of the Board and President; Gary L. Martin, Vice President;
Patrick F. Hamner, Vice President; and Tim Smith, Vice President and
Secretary-Treasurer, officers of the Corporation whose total compensation earned
during the fiscal year ended March 31, 2000 exceeded $100,000.
Annual Compensation
----------------------------------------
Name and Fiscal Other Annual All Other
Principal Position Year Salary Bonus Compensation(1) Compensation(2)
------------------ ------ ------ ----- --------------- ---------------
William R. Thomas 2000 $250,000 $ 10,417 $16,000 -
Chairman of the 1999 250,000 85,417 12,000 -
Board and President 1998 250,000 145,833 24,000 -
Gary L. Martin 2000 169,500 22,380 - 3,200
Vice President 1999 157,000 42,279 - 1,600
1998 152,500 1,481 - -
9
Annual Compensation
----------------------------------------
Name and Fiscal Other Annual All Other
Principal Position Year Salary Bonus Compensation(1) Compensation(2)
------------------ ------ ------ ----- --------------- ---------------
Patrick F. Hamner 2000 $126,252 $50,417 $2,027 $13,973
Vice President 1999 112,248 44,792 3,180 8,598
1998 102,500 48,667 8,511 14,164
Tim Smith 2000 116,250 35,000 1,916 13,209
Vice President and 1999 103,750 39,375 2,898 7,836
Secretary-Treasurer 1998 98,000 43,333 7,957 13,243
- ------------
(1) Amounts accrued for each executive officer in lieu of a contribution to his
account in an employee stock ownership plan for employees of the
Corporation and one of its wholly-owned subsidiaries (the "ESOP").
(2) Amounts contributed to the ESOP accounts of each executive officer.
The aggregate amount of perquisites and other personal benefits provided to
Messrs. Thomas, Martin, Hamner and Smith was less than 10% of the total of
annual salary and bonus of such officers.
In accordance with the Corporation's established policy, its officers and
employees are required to remit to the Corporation all compensation received for
serving as a director of any portfolio company of the Corporation.
Additional Compensation Information
The following table sets forth additional compensation information for the
fiscal year ended March 31, 2000 for each of the three highest-paid executive
officers whose compensation exceeded $60,000 (William R. Thomas and Gary L.
Martin, both of whom are directors of the Corporation, and Patrick F. Hamner)
and for all other directors (Graeme W. Henderson, James M. Nolan and John H.
Wilson), none of whom are employees of the Corporation.
Pension or Retirement
Aggregate Benefits Accrued as Estimated Annual
Compensation from Part of Corporation's Benefits Upon
Name and Position the Corporation Expenses Retirement
- ----------------- ----------------- --------------------- ----------------
William R. Thomas (1) $276,417 (3) (4)
Director, Chairman
and President
10
Pension or Retirement
Aggregate Benefits Accrued as Estimated Annual
Compensation from Part of Corporation's Benefits Upon
Name and Position the Corporation Expenses Retirement
- ----------------- ----------------- --------------------- ----------------
Gary L. Martin (1) $195,080 (3) (4)
Director and Vice
President
Patrick F. Hamner (1) 192,669 (3) (4)
Vice President
Graeme W. Henderson (2) 28,000 None None
Director
James M. Nolan (2) 28,000 None None
Director
John H. Wilson (2) 22,000 None None
Director
- ------------
(1) See Option Exercises and Fiscal Year End Values for information regarding
stock options exercised during or held at the end of the fiscal year ended
March 31, 2000. See Retirement Plans for information on the Corporation's
Retirement Plan and Retirement Restoration Plan. See Stock Ownership Plan
for a description of the Corporation's Employee Stock Ownership Plan and
Summary Compensation Table for amounts contributed to each officer's ESOP
account.
(2) Directors who are not employees of the Corporation are compensated as
described under Compensation of Directors and are not participants in the
Corporation's Retirement Plan or Employee Stock Ownership Plan.
(3) As described in Note 8 to the Corporation's Consolidated Financial
Statements, the Retirement Plan was overfunded and therefore generated a
benefit for the year ended March 31, 2000. After deducting the expense of
the unfunded Retirement Restoration Plan, the Corporation's net benefit
attributable to both plans was $435,984 for the year ended March 31, 2000.
The Corporation's net benefit is not allocated to individual plan
participants.
(4) Individual retirement benefits are based on formulas relating benefits to
average final compensation and years of credited service. See Retirement
Plans which includes both a table of estimated annual retirement benefits
and a description of the retirement benefits currently payable to Mr.
Thomas.
11
Option Grants in Last Fiscal Year
Number of Potential Realizable Value
Securities % of Total at Assumed Annual Rates of
Underlying Options Granted Stock Price Appreciation
Options to Employees Exercise Expiration for Option Term(2)
Granted (1) in Fiscal Year Price ($/Sh) Date 5%(3) 10%(4)
----------- -------------- ------------ ---------- -------- ----------
William R. Thomas 6,000 15.8% $84.70 7/19/04 $ 81,442 $ 235,856
Patrick F. Hamner 10,000 26.3% 77.00 7/19/09 484,249 1,227,182
Tim Smith 10,000 26.3% 77.00 7/19/09 484,249 1,227,182
(1) All options become exercisable in eight equal annual installments
beginning July 19, 2000, except for options granted to Mr. Thomas which
are exercisable in five equal annual installments beginning July 19,
1999.
(2) The values shown are based on the indicated assumed annual rates of
appreciation compounded annually over the term of the option. Actual
gains realized, if any, on stock option exercises and common stock
holdings are dependent on the future performance of the common stock
and overall stock market conditions. There can be no assurance that
values shown in this table will be achieved.
(3) Represents an assumed market price per share of common stock of $98.27
at July 19, 2004 and $125.42 at July 19, 2009.
(4) Represents an assumed market price per share of common stock of $124.01
at July 19, 2004 and $199.72 at July 19, 2009.
Option Exercises and Fiscal Year End Values
The following table discloses, for the named executive officers,
information regarding stock options exercised during, or held at the end of,
fiscal 2000.
12
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired on Value Options at 3/31/00 at 3/31/00 (2)
Name Exercise (#) Realized (1) Exercisable(#) Unexercisable(#) Exercisable Unexercisable
- ---- ------------ ------------ -------------- ---------------- ----------- -------------
William R. Thomas - - 1,200 4,800 $ - $ -
Gary L. Martin - - 14,000 - 267,750 -
Patrick F. Hamner - - 14,000 10,000 267,750 -
Tim Smith - - 14,000 10,000 267,750 -
- ------------
(1) Value realized is calculated as the fair market value on the date of
exercise net of the option exercise price, but before any tax liabilities
or transaction costs.
(2) Value of unexercised options is calculated as the closing market price on
March 31, 2000 ($54.75) net of the option exercise price, but before any
tax liabilities or transaction costs.
Retirement Plans
The foregoing Summary Compensation Table does not include any
contribution, payment or accrual under a qualified non-contributory retirement
plan (the "Retirement Plan") maintained by the Corporation and certain of its
wholly-owned subsidiaries as such amounts cannot readily be separately or
individually calculated. Messrs. Hamner, Martin, Smith and Thomas participate in
the Retirement Plan. An eligible employee or his survivor will be entitled under
the Retirement Plan to receive, upon retirement, death or disability, monthly
payments based upon formulas relating benefits to salary and years of credited
service, which is generally determined by averaging the five consecutive years
of highest compensation prior to retirement. Salaries and bonuses (excluding
other annual compensation) reported in the foregoing Summary Compensation Table
are substantially identical to compensation covered by the Retirement Plan
("Covered Compensation").
The following table sets forth, for purposes of illustration, the
estimated annual retirement benefit payable under the Retirement Plan as a
straight life annuity upon retirement to participants of specified Covered
Compensation and years of credited service who are fully vested (five years of
service). Messrs. Hamner, Martin, Smith and Thomas had 18, 27, 10 and 38 years,
respectively, of credited service under the plan as of May 1, 2000. All
calculations assume retirement in 2000 at age 65 (normal retirement age).
13
Total Covered Estimated Annual Benefits
Compensation Based on Service of:
15 Years 20 Years 25 Years 30 Years 35 Years
-------------------------------------------------------------
$125,000............. $ 32,203 $ 42,937 $ 53,671 $ 64,406 $ 75,140
150,000............. 39,328 52,437 65,546 78,656 91,765
175,000............. 46,453 61,937 77,421 92,906 108,390
200,000............. 53,578 71,437 89,296 107,156 125,015
225,000............ 60,703 80,937 101,171 121,406 141,640
250,000............ 67,828 90,437 113,046 135,656 158,265
300,000............ 82,078 109,437 136,796 164,156 191,515
350,000............. 96,328 128,437 160,546 192,656 224,765
400,000............. 110,578 147,437 184,296 221,156 258,015
Certain of the amounts in the above table are subject to reduction
because applicable federal regulations limit the amount of annual benefits
payable to certain higher-paid participants under a tax-qualified retirement
plan such as the Retirement Plan. The extent of such reductions will vary in
individual cases according to circumstances existing at the time pension
payments commence. Consequently, the Corporation and certain of its wholly-owned
subsidiaries have adopted an unfunded benefit equalization plan (the "Retirement
Restoration Plan") to compensate employees of the Corporation and chief
executive officers of certain of the Corporation's wholly-owned subsidiaries for
the loss of retirement benefits resulting from such limitations. This Retirement
Restoration Plan provides for the payment, upon retirement, of the difference
between the maximum annual payment permissible under the Retirement Plan
pursuant to federal limitations and the amount which would otherwise have been
payable.
Mr. Thomas is entitled to a substantially increased annual retirement
benefit as a result of his service beyond the normal retirement age and to an
additional annual retirement benefit as a result of his credited service prior
to April 1972 under a retirement benefit formula of the Corporation's Retirement
Plan which was modified for credited service subsequent to April 1972. Although
Mr. Thomas is a full-time employee of the Corporation, Section 401(a)(9) of the
Internal Revenue Code required that he begin receiving monthly retirement
benefit payments on April 1, 2000 because of his age and ownership of more than
5% of the Corporation's common stock. Retirement benefits payable (for life
only) to Mr. Thomas under the Retirement Plan and Retirement Restoration Plan
total $440,342 per annum.
Stock Ownership Plan
The Corporation maintains an employee stock ownership plan ("ESOP") for
employees of the Corporation and one of its wholly-owned subsidiaries in which
Messrs. Hamner and Smith participate. The Whitmore Manufacturing Company
maintains an employee stock ownership plan for its employees, in which Mr.
Martin participates. Employees who have completed one year of credited service,
as defined in the plan, are eligible to participate in the ESOP. Contributions
to the ESOP are discretionary, within limits established by the Internal Revenue
Code. Funds contributed to the trust established under the ESOP are applied by
the trustees to the purchase, in the open market at prevailing market prices, of
14
Common Stock of the Corporation. A participant's interest in contributions to
the ESOP fully vests after five years of credited service, and such vested
interest is distributed to a participant at retirement, death or total
disability, or after a one year break in service resulting from termination of
employment for any other reason. See Note (2) to the table under STOCK OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS.
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS (PROPOSAL 2)
The Board of Directors has appointed the firm of KPMG LLP as
independent auditors for the fiscal year ending March 31, 2001, subject to
ratification by the shareholders. A representative of KPMG LLP is expected to be
present at the Annual Meeting with an opportunity to make a statement, and will
be available to respond to appropriate questions.
In order to approve the appointment of KPMG LLP as independent auditors
for the Corporation for the year ending March 31, 2001, the proposal must
receive the favorable vote of a majority of the shares entitled to vote and
represented at the Annual Meeting.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any shareholder proposal to be considered by the Corporation for
inclusion in the proxy material for the 2001 Annual Meeting of Shareholders must
be received by the Secretary of the Corporation, 12900 Preston Road, Suite 700,
Dallas, Texas 75230, no later than February 3, 2001. Mere submission of a
proposal for consideration does not guarantee its inclusion in the proxy
material or presentation at the meeting. All shareholder proposals are subject
to the rules under the federal securities laws.
EXPENSES OF SOLICITATION OF PROXIES
In addition to the use of the mails, proxies may be solicited by
personal interview and telephone by directors, officers and other employees of
the Corporation, who will not receive additional compensation for such services.
The Corporation will also request brokerage houses, nominees, custodians and
fiduciaries to forward soliciting materials to the beneficial owners of stock
held of record by them and will reimburse such persons for forwarding materials.
The cost of soliciting proxies will be borne by the Corporation.
ANNUAL REPORT
The Annual Report to Shareholders covering the fiscal year ended March
31, 2000 accompanies this proxy statement, but is not deemed a part of the proxy
soliciting material.
A copy of the fiscal 2000 Form 10-K report to the Securities and
Exchange Commission will be mailed to shareholders without charge upon written
request to Tim Smith, Secretary, Capital Southwest Corporation, 12900 Preston
Road, Suite 700, Dallas, Texas 75230.
15
Appendix A
Capital Southwest Corporation
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- JULY 17, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE CORPORATION.
The undersigned (1) acknowledges receipt of the Notice of Annual Meeting of
Shareholders of Capital Southwest Corporation, a Texas corporation, (the
"Corporation") to be held on Monday, July 17, 2000, at 10:00 a.m., Dallas time,
in the Meeting Room (1st floor) of the North Dallas Bank Tower, 12900 Preston
Road, Dallas, Texas, and the Proxy Statement in connection therewith; and (2)
appoints James M. Nolan, William R. Thomas and John H. Wilson, and each of them,
his proxies with full power of substitution, for and in the name, place and
stead of the undersigned, to vote upon and act with respect to all of the shares
of Common Stock of the Corporation standing in the name of the undersigned, or
with respect to which the undersigned is entitled to vote and act at the meeting
and at any adjournment thereof, and the undersigned directs that this proxy be
voted:
IMPORTANT: SIGN ON OTHER SIDE
FOR all nominees WITHHOLD AUTHORITY
listed at right to vote for
(except as marked all nominees
to the contrary below) listed at right Nominees: Graeme W. Henderson
1. Election of Gary L. Martin
Directors James M. Nolan
--------- --------- William R. Thomas
(INSTRUCTION: To withhold authority to vote for John H. Wilson
any individual nominee, write that nominee's name
in the space provided below.)
- -------------------------------------------------
FOR AGAINST ABSTAIN
2. Proposal to ratify the appointment of KPMG LLP as
independent auditors for the Corporation. ------ ------ ------
3. In the discretion of the proxies, on any other matter
that may properly come before the meeting or, subject
to the conditions in the Proxy Statement, any
adjournment thereof.
This proxy when properly executed will be voted in the
manner directed. Unless otherwise marked, this proxy will be
voted for the election of the persons named at the left
hereof and for the proposal described in (2) above.
If more than one of the proxies named herein shall be
present in person or by substitute at the meeting or at any
adjournment thereof, the majority of the proxies so present
and voting, either in person or by substitute, shall
exercise all of the powers hereby given.
The undersigned hereby revokes any proxy or proxies
heretofore given to vote upon or act with respect to such
stock and hereby ratifies and confirms all that the proxies,
their substitutes, or any of them, may lawfully do by virtue
hereof.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
- ------------------------------- ------------------------------ ------------------------- Date: ,2000
Signature of Shareholder Signature of Shareholder Title, if applicable --------
NOTE: Please date this proxy and sign your name exactly as it appears hereon.
Where there is more than one owner, each should sign. When signing as
an attorney, administrator, executor, guardian or trustee, please add
your title as such. If executed by a corporation, the proxy should be
signed by a duly authorized officer. EACH JOINT TENANT SHOULD SIGN.
