SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by 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 ss.240.14a-11(c) or ss.240.14a-12
Capital Southwest Corporation
-----------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14-a6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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June 12, 1997
To the Shareholders of Capital Southwest Corporation:
The Annual Meeting of Shareholders of our Corporation will be held on
Monday, July 21, 1997, 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, 1997 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 21, 1997
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 21, 1997, 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 approve the appointment of KPMG Peat Marwick 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 2, 1997 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
enclosed proxy.
By Order of the Board of Directors
TIM SMITH
Secretary
Dallas, Texas
June 12, 1997
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 21, 1997
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 21, 1997 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 12, 1997.
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) approving the
appointment by the Board of Directors of KPMG Peat Marwick 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
Peat Marwick LLP as independent auditors for the Corporation for the year ending
March 31, 1998, 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 approval of the appointment of KPMG Peat Marwick 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
2, 1997, at which time the Corporation had outstanding and entitled to vote at
the meeting 3,767,051 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 approval of
the appointment by the Board of Directors of KPMG Peat Marwick 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, 1997 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, and
(3) all directors and executive officers of the Corporation as a group.
Name and Address Shares Owned Percent
of Beneficial Owner Beneficially of Class
------------------- ------------ --------
William R. Thomas
12900 Preston Rd., Suite 700
Dallas, Texas 75230......................... 1,099,368 (1)(2)(3) 29.1%
J. Bruce Duty
12900 Preston Rd., Suite 700
Dallas, Texas 75230......................... 557,586 (1)(2) 14.8
2
Name and Address Shares Owned Percent
of Beneficial Owner Beneficially of Class
------------------- ------------ ---------
David M. Smith
2830 Produce Row
Houston, Texas 77021....................... 246,511 (1) 6.5
U.S. Trust Corporation
114 West 47th Street
New York, New York 10036.................... 218,050 (4) 5.8
Harris Associates L.P.
Two North LaSalle Street
Chicago, IL 60602.......................... 192,416 (5) 5.1
Gary L. Martin
930 Whitmore Dr.
Rockwall, Texas 75087....................... 152,229(1)(2) 4.0
Tim Smith................................... 103,944 (1)(2) 2.8
Patrick F. Hamner........................... 31,904 (2) 0.8
All directors and executive officers
as a group (9 persons)...................... 1,309,602 (6) 34.3
(1) Messrs. Duty 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 422,966 shares, with the
power as trustees to vote such shares. Messrs. Duty 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. Duty and
Thomas have shared voting and investment power with respect to the 511,110
shares, representing 13.6% 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. Duty and Thomas are both deemed to
be the beneficial owners of such 511,110 shares which are included in the shares
beneficially owned by Messrs. Duty and Thomas.
Mr. Martin serves as trustee, with Messrs. Duty and Thomas, of one of the
aforementioned trusts owning 52,775 shares. Under the rules and regulations of
the Securities and Exchange Commission, Mr. Martin is deemed to be the
beneficial owner of such 52,775 shares which are included in the shares
beneficially owned by Mr. Martin.
3
Mr. D. Smith, President of The RectorSeal Corporation, a wholly-owned
subsidiary of the Corporation, serves as trustee, with Messrs. Duty and Thomas,
of one of the aforementioned trusts owning 239,716 shares. Under the rules and
regulations of the Securities and Exchange Commission, Mr. D. Smith is deemed to
be the beneficial owner of such 239,716 shares which are included in the shares
beneficially owned by Mr. D. Smith.
Of the shares owned by trusts pursuant to the aforementioned employee stock
ownership plans, 15,715, 3,317 and 17,349 were allocated to Messrs. Duty, Martin
and D. Smith, respectively, all of which were vested.
Mr. T. Smith, with Messrs. Duty and Thomas, participates 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. Under the rules and regulations of the
Securities and Exchange Commission, Mr. T. Smith is deemed to be the beneficial
owner of such 88,144 shares which are included in the shares beneficially owned
by Mr. T. Smith.
(2) Includes 11,200, 8,400, 7,185, 5,800 and 12,840 shares subject to
immediately exercisable stock options held by Messrs. Thomas, Duty, Martin, T.
Smith and Hamner, respectively.
(3) Mr. Thomas has sole voting and investment power with respect to 300,692
shares, and shared voting and investment power with respect to 276,366 shares
which include 69,841 shares owned by his children, as to which he disclaims
beneficial ownership, 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.
(4) As reported to the Corporation by U.S. Trust Corporation, that
corporation has shared dispositive power and shared voting power with respect to
218,050 shares via either a trust/fiduciary capacity and/or a portfolio
management/agency relationship with the persons who own the shares.
(5) As reported to the Corporation by Harris Associates L.P., that
partnership has sole dispositive power with respect to 104,316 shares, shared
dispositive power with respect to 88,100 shares and shared voting power with
respect to 192,416 shares by reasons of advisory and other relationships with
the persons who own the shares.
(6) Includes (i) the shares owned by the trusts and partnership referred to
in Notes (1) and (3), respectively, to the above table, (ii) 53,825 shares
subject to immediately exercisable stock options (including those referred to in
Note (2) to the above table), (iii) 1,500 shares held in a retirement trust for
the benefit of a director of the Corporation and (iv) 69,841 shares owned by
immediate family members of Mr. Thomas (as to which shares he disclaims
beneficial ownership). If the 36,175 shares subject to stock options became
4
exercisable pursuant to terms of the stock option plan related to a "change in
control" of the Corporation (see COMPENSATION OF DIRECTORS AND EXECUTIVE
OFFICERS - Incentive Stock Option Plan), all executive officers and directors as
a group would, upon exercise of such options, beneficially own 35.4% of the
outstanding Common Stock of the Corporation.
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
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 63, 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. Mr. Henderson also serves as a director of Starwood Lodging
Corporation.
*GARY L. MARTIN
Mr. Martin, age 50, 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 63, 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. He served as a director of DSC
Communications Corporation from 1981 to 1996.
5
*WILLIAM R. THOMAS
Mr. Thomas, age 68, 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
and Palm Harbor Homes, Inc.
JOHN H. WILSON
Mr. Wilson, age 54, 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 since 1995. Mr. Wilson
also serves as a director of Whitehall Corporation, Norwood Promotional
Products, Inc., Encore Wire Corporation and Palm Harbor Homes, Inc.
The following table sets forth the name of each nominee for election to the
Board of Directors of the Corporation and the amount and percentage of Common
Stock of the Corporation beneficially owned (as that term is defined in the
rules and regulations of the Securities and Exchange Commission) by each nominee
as of May 1, 1997.
Shares Owned Percent
Name of Nominee Beneficially(1) of Class
--------------- --------------- --------
Graeme W. Henderson................................. 4,700 (2) less than 1%
* Gary L. Martin ...................................... 152,229 (3) 4.0%
James M. Nolan...................................... 2,500 less than 1%
* William R. Thomas ................................... 1,099,368 (4) 29.1%
John H. Wilson...................................... 1,000 less than 1%
* Messrs. Martin and Thomas are "interested persons" as that term is defined
in Section 2(a)(19) of the Investment Company Act of 1940.
(1) Unless otherwise indicated below, each of the persons named in the above
table has sole voting and investment power with respect to the shares
indicated to be beneficially owned.
(2) Includes 1,500 shares held by a retirement trust for the benefit of Mr.
Henderson.
(3) Includes 52,775 shares owned on May 1, 1997 by a trust pursuant to an
employee stock ownership plan for employees of The Whitmore Manufacturing
Company, a wholly-owned subsidiary of the Corporation. Mr. Martin is deemed
the beneficial owner of the 52,775 shares, and has shared voting and
investment power with respect to such shares. See Note (1) of the table
under STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS for information about
such trust and beneficial ownership. Also includes 7,185 shares subject to
exercisable stock options held by Mr. Martin.
6
(4) Includes 511,110 shares owned on May 1, 1997 by certain trusts pursuant to
benefit plans for employees of the Corporation and its wholly-owned
subsidiaries. Mr. Thomas is deemed the beneficial owner of the 511,110
shares, and has shared voting and investment power with respect to such
shares. See Note (1) of the table under STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS for information about such trusts and beneficial
ownership. Mr. Thomas has sole voting and investment power with respect to
300,692 shares, and shared voting and investment power with respect to
276,366 shares which include 69,841 shares owned by 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. Also
includes 11,200 shares subject to exercisable stock options held by Mr.
Thomas.
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, 1997.
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 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, 1997, seven meetings (including
three telephone meetings) of the Board of Directors were held. In addition, two
meetings of the Compensation Committee and two meetings of the Audit Committee
were held. Each of the directors attended at least 75 percent 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.
7
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
(Graphic Omitted)
Nasdaq Total Nasdaq Financial Capital Southwest
Returns (U.S.) Stocks Corporation
-------------- ---------------- -----------------
1992 100 100 100
1993 114.958 142.294 156.626
1994 124.091 148.204 166.225
1995 138.040 166.014 168.407
1996 187.434 228.665 285.353
1997 208.486 293.908 333.301
8
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 $12,000 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.
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
investment 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 Incentive Stock Option Plan and contributions pursuant to the
Employee Stock Ownership Plan.
Base salaries were determined by the Committee in July 1996 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, surveys of compensation levels for comparable positions and
internal equities among positions. In addition to base salaries, executive
officers received bonus payments in March 1997, the amounts of which were
determined by the Committee on a discretionary basis, taking into consideration
individual performance and the Corporation's overall performance, with
particular emphasis on the achievement of long-term investment objectives.
Under the terms of the Corporation's 1984 Incentive Stock Option Plan, which
expired in 1994, the Committee from time to time granted stock options to
executive officers to reinforce the alignment of their long-term interests with
those of the shareholders. Stock options were granted at exercise prices not
less than the fair market value of the stock on the date of grant and thus have
no value unless the value of the Corporation's stock appreciates. During the ten
years of the 1984 Incentive Stock Option Plan, the Committee granted options on
a total of 294,000 shares, of which 204,000 were exercised and 90,000 are
currently unexercised. The Committee granted no incentive stock options during
the fiscal year ended March 31, 1997. An important additional equity incentive
is provided by the Corporation's Employee Stock Ownership Plan, to which the
Corporation contributed 8.11% of each participating employee's covered
compensation for the fiscal year ended March 31, 1997.
9
The Committee established the base salary of the Corporation's chief executive
officer, William R. Thomas, in July 1996 and his discretionary bonus in March
1997. Compensation levels for Mr. Thomas were determined on the basis of the
factors cited in the preceding paragraph, 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 compared with similar investment
companies and Mr. Thomas' role in defining and accomplishing the Corporation's
long-term investment objectives and administering its investment management
activities.
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 earned by or paid to William R. Thomas, Chairman of the Board and
President; J. Bruce Duty, Senior Vice 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, 1997 exceeded $100,000.
Annual Compensation
-------------------
Name and Fiscal Other Annual All Other
Principal Position Year Salary Bonus Compensation(1) Compensation(2)
- ------------------ ------ ------ ----- --------------- --------------
William R. Thomas 1997 $250,000 $145,417 $18,000 $ -
Chairman of the 1996 250,000 150,417 18,000 -
Board and President 1995 250,000 30,417 15,000 -
J. Bruce Duty 1997 148,500 76,250 5,835 12,165
Senior Vice President 1996 142,375 71,000 - 18,000
1995 135,625 25,729 9,885 5,115
Gary L. Martin 1997 148,000 36,898 - 12,272
Vice President 1996 147,000 26,423 - -
1995 143,000 27,701 - 5,115
Patrick F. Hamner 1997 96,500 44,083 5,469 11,401
Vice President 1996 90,250 43,833 - 16,090
1995 83,750 33,542 7,730 4,000
Tim Smith 1997 90,500 38,833 5,031 10,489
Vice President and 1996 84,500 38,583 - 14,770
Secretary-Treasurer 1995 78,750 28,333 7,057 3,652
10
(1) Amounts paid to 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, Duty, 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, 1997 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 J. Bruce Duty) 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) $413,417 (3) (4)
Director, Chairman
and President
J. Bruce Duty (1) 242,750 (3) (4)
Senior Vice President
Gary L. Martin (1) 197,170 (3) (4)
Director and Vice
President
Graeme W. Henderson (2) 23,500 None None
Director
James M. Nolan (2) 23,500 None None
Director
John H. Wilson (2) 17,500 None None
Director
11
(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, 1997. See Incentive Stock Option Plan for a
description of the Corporation's 1984 Incentive Stock Option Plan,
which expired on April 16, 1994; no options were granted during the
fiscal year ended March 31, 1997. 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 Stock Option Plan, Retirement Plan or Employee Stock
Ownership Plan.
(3) As described in Note 8 to the Corporation's Consolidated Statements of
Financial Condition and Consolidated Statements of Operations, the
Retirement Plan was overfunded and therefore generated a benefit for the
year ended March 31, 1997. After deducting the expense of the unfunded
Retirement Restoration Plan, the Corporation's net benefit attributable to
both plans was $349,903 for the year ended March 31, 1997. 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 a table of estimated annual retirement benefits.
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 1997.
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired on Value Options at 3/31/97 at 3/31/97 (2)
Name Exercise (#) Realized (1) Exercisable(#) Unexercisable(#) Exercisable Unexercisable
- ---- ------------ ------------ -------------- --------------- ------------ -------------
William R. Thomas - $ - 11,200 2,800 $321,300 $80,325
J. Bruce Duty - - 8,400 5,600 270,900 180,600
Gary L. Martin - - 7,185 6,815 231,716 219,784
Patrick F. Hamner - - 12,840 7,160 488,340 230,910
Tim Smith - - 5,800 8,200 187,050 264,450
12
(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, 1997 ($67.875) net of the option exercise prices, but before any
tax liabilities or transaction costs.
Incentive Stock Option Plan
The Corporation's 1984 Incentive Stock Option Plan (the "Stock Option
Plan"), which expired on April 16, 1994, provided for the grant of options,
intended to qualify as incentive stock options. All regular salaried employees
of the Corporation or officers of the Corporation who were regular salaried
employees of the Corporation or one of its subsidiaries were eligible to receive
options. No options were granted during the fiscal year ended March 31, 1997.
The Stock Option Plan was administered by the Corporation's Board of
Directors, which approved the officers or employees to whom options were
granted, the number of options granted to each officer or employee, the dates of
grant, the terms and provisions of the respective option agreements (which need
not be identical) and certain other terms and conditions governing the options.
The exercise price was not less than the fair market value of the Common Stock
on the date the option was granted, and the term of any option did not exceed
ten years. The Stock Option Plan provided that outstanding options become
immediately exercisable if (i) a person who has not owned 5% or more of the
Common Stock for five years acquires 25% or more of the outstanding Common
Stock, (ii) there is a change of a majority of the directors of the Corporation
if such new directors have not been approved by the incumbent directors, or
(iii) a duly called meeting of shareholders is held for the purpose of either
electing an opposing majority of the Board of Directors or voting upon a merger,
liquidation or sale of all the assets of the Corporation. The potential cost of
the benefits afforded option holders could discourage attempts to acquire the
Corporation.
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. Duty, 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").
13
The following table sets forth, for purposes of illustration, the
estimated annual retirement benefit payable under the Retirement Plan as a
straight life annuity, after deduction of certain projected Social Security
benefits, upon retirement to participants of specified Covered Compensation and
years of credited service who are fully vested (five years of service). Messrs.
Duty, Hamner, Martin, Smith and Thomas had 17, 15, 24, 7 and 35 years,
respectively, of credited service under the plan as of May 1, 1997. All
calculations assume retirement at age 65 (normal retirement age) and are based
on the Social Security law in effect on January 1, 1997.
Total Covered Estimated Annual Benefits
Compensation Based on Service of:
15 Years 20 Years 25 Years 30 Years 35 Years
-------------------------------------------------------------
$125,000..............$ 34,643 $ 46,190 $ 57,738 $ 69,286 $ 80,833
150,000................42,143 56,190 70,238 84,286 98,333
175,000................49,643 66,190 82,738 99,286 115,833
200,000............... 57,143 76,190 95,238 114,286 133,333
225,000............... 64,643 86,190 107,738 129,286 150,833
250,000............... 72,143 96,190 120,238 144,286 168,333
300,000............... 87,143 116,190 145,238 174,286 203,333
350,000...............102,143 136,190 170,238 204,286 238,333
400,000...............117,143 156,190 195,238 234,286 273,333
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 will be entitled 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. Assuming Mr. Thomas had retired on
March 31, 1997, the annual retirement benefit payable to Mr. Thomas under the
Retirement Plan and the Retirement Restoration Plan described above would have
been $333,054.
14
Stock Ownership Plan
The Corporation maintains an employee stock ownership plan for
employees of the Corporation and one of its wholly-owned subsidiaries in which
Messrs. Duty, Hamner and T. 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 of 1986. 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 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 (1) 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 Peat Marwick LLP
as independent auditors for the fiscal year ending March 31, 1998, subject to
approval by the shareholders. A representative of KPMG Peat Marwick 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 Peat Marwick LLP as
independent auditors for the Corporation for the year ending March 31, 1998, 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 1998 ANNUAL MEETING
Any shareholder proposal to be considered by the Corporation for
inclusion in the proxy material for the 1998 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 4, 1998. 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.
15
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, 1997 accompanies this proxy statement, but is not deemed a part of the proxy
soliciting material.
A copy of the fiscal 1997 Form 10-K report to the Securities and
Exchange Commission, excluding exhibits, 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. Such requests
must set forth a good faith representation that the requesting party was either
a holder of record or a beneficial owner of Common Stock of the Corporation on
June 2, 1997. Exhibits to the Form 10-K will be mailed upon similar request and
payment of specified fees.
Please date, sign 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 12, 1997
16
Appendix A
Capital Southwest Corporation
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- JULY 21, 1997
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 21, 1997, 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 Graeme W. Henderson, 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 approve the appointment
of KPMG Peat Marwick 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.
_______________________________ ______________________________
Signature of Shareholder Signature of Shareholder
_______________________________ Date: ________________, 1997
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.
