SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
Capital Southwest Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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June 4, 2002
To the Shareholders of Capital Southwest Corporation:
The Annual Meeting of Shareholders of our Corporation will be held on
Monday, July 15, 2002, 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, 2002 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,
/s/ William R. Thomas
-----------------------------------
William R. Thomas
President and Chairman of the Board
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 15, 2002
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 15, 2002, 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 3, 2002 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
SUSAN K. HODGSON
Secretary
Dallas, Texas
June 4, 2002
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 15, 2002
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 15, 2002 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 4, 2002.
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,
2003, 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
3, 2002, at which time the Corporation had outstanding and entitled to vote at
the meeting 3,829,051 shares of Common Stock.
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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, 2002 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................... 961,063 (1)(2)(3) 25.1%
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Name and Address Shares Owned Percent
of Beneficial Owner Beneficially of Class
------------------- ------------ --------
EQSF Advisers, Inc.
767 Third Avenue
New York, New York 10017.............. 422,836 (4) 11.0
Artisan Partners Limited Partnership
1000 North Water Street #1770
Milwaukee, Wisconsin 53202........... 330,903 (5) 8.6
First Manhattan Company
437 Madison Avenue
New York, New York 10022............. 217,671 (6) 5.7
Gary L. Martin........................ 230,777 (2)(3) 6.0
Patrick F. Hamner..................... 129,708 (2)(3) 3.4
Graeme W. Henderson................... 4,700 (7) 0.1
James M. Nolan........................ 4,000 0.1
John H. Wilson........................ 1,000 -
All directors and executive officers
as a group (7 persons)................ 1,119,454 (8) 29.0
(1) Mr. Thomas has sole voting and investment power with respect to
611,332 shares, which include 75,620 shares owned by his two 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) Mr. Thomas is a trustee of certain trusts pursuant to employee
stock ownership plans for employees of the Corporation and its wholly-owned
portfolio companies owning 256,787 shares, with the power as trustee to vote
such shares. Mr. Thomas also 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 portfolio companies of the
Corporation. Accordingly, Mr. Thomas has shared voting and investment power with
respect to the 344,931 shares, representing 9.0% of the outstanding Common Stock
of the Corporation, owned by the aforementioned trusts. Under the rules and
regulations of the Securities and Exchange Commission, Mr. Thomas is deemed to
be the beneficial owner of such 344,931 shares, which are included in the shares
beneficially owned by Mr. Thomas.
3
Mr. Martin serves as trustee, with Mr. Thomas, of two of the
aforementioned trusts owning 36,364 and 88,144 shares. Accordingly, Mr. Martin
has shared voting and investment power with respect to the 124,508 shares. Under
the rules and regulations of the Securities and Exchange Commission, Mr. Martin
is deemed to be the beneficial owner of such 124,508 shares, which are included
in the shares beneficially owned by Mr. Martin.
Of the shares owned by a trust pursuant to the aforementioned employee
stock ownership plans, 4,034 were allocated to Mr. Martin, all of which were
vested.
Mr. Hamner, with Messrs. Thomas and Martin, 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 16,500, 14,000 and 4,800 shares subject to immediately
exercisable stock options held by Messrs. Hamner, Martin and Thomas,
respectively.
(4) As reported to the Corporation by EQSF Advisers, Inc., that
corporation or M. J. Whitman Advisers, Inc. or Martin J. Whitman, individually,
had shared voting and dispositive power with respect to none of such shares,
sole voting power with respect to 411,311 shares and sole dispositive power with
respect to 422,836 shares by reasons of advisory and other relationships with
the persons who own the shares. EQSF Advisers, Inc., M. J. Whitman Advisers,
Inc. and Martin J. Whitman beneficially own 133,111, 265,481 and 24,244,
respectively, of such shares.
(5) As reported to the Corporation by Artisan Partners Limited
Partnership ("Artisan Partners"), that partnership or Artisan Investment
Corporation ("Artisan Corp.") or Andrew A. Ziegler, individually, or Carlene
Murphy Ziegler, individually, had sole voting and dispositive power with respect
to none of such shares and shared voting and dispositive power with respect to
330,903 shares by reasons of advisory and other relationships with the persons
who own the shares. Artisan Partners is an investment adviser; Artisan Corp. is
the General Partner of Artisan Partners; and Mr. Ziegler and Ms. Ziegler are the
principal stockholders of Artisan Corp.
(6) As reported to the Corporation by First Manhattan Co., that
partnership had sole voting and dispositive power with respect to 2,000 shares,
shared voting power with respect to 205,146 shares and shared dispositive power
with respect to 215,671 shares by reasons of advisory and other relationships
with the persons who own the shares.
(7) Includes 1,500 shares held by a retirement trust for the benefit of
Mr. Henderson.
(8) Includes (a) the shares owned by the partnership and trusts
referred to in Notes (1) and (2), respectively, to the above table, (b) 36,100
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) 75,620 shares owned by
immediate family members of Mr. Thomas.
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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 68, 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 55, 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 portfolio company of the Corporation.
JAMES M. NOLAN
Mr. Nolan, age 68, 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 73, 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.
5
Thomas also serves as a director of Alamo Group Inc., Encore Wire Corporation
and Palm Harbor Homes, Inc.
JOHN H. WILSON
Mr. Wilson, age 59, 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 was President of Whitehall Corporation from 1995
to 1998. Mr. Wilson also serves as a director of Encore Wire Corporation and
Palm Harbor Homes, Inc.
* Messrs. Martin and Thomas are "interested persons" as that term is
defined in Section 2(a)(19) of the Investment Company Act of 1940.
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, 2002, five meetings (including
one telephone meeting) 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.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee consists of the three independent members of the
Corporation's Board of Directors. The duties and responsibilities of the Audit
Committee are set forth in the Audit Committee Charter, which the Board of
Directors adopted on April 17, 2000 and reviews on an annual basis.
The Audit Committee has discharged its duties and responsibilities
pursuant to the Audit Committee Charter and has:
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o Reviewed and discussed the audited consolidated financial statements
for the fiscal year ended March 31, 2002 with the management and with
the independent auditors;
o Discussed with the independent auditors the matters required to be
discussed by SAS 61 (Codification of Statements on Auditing Standards);
and,
o Received and discussed the written disclosures from the independent
auditors required by Independence Standards Board Statement No. 1
(Independence Discussions with Audit Committee).
Based on such review and discussions with management and the
independent auditors, the Audit Committee recommends to the Board of Directors
that the audited consolidated financial statements be included in the Annual
Report on Form 10-K for the fiscal year ended March 31, 2002, for filing with
the Securities and Exchange Commission.
Audit Committee
Graeme W. Henderson, Chairman
James M. Nolan
John H. Wilson
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 2001 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 2002, 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 2001, 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
7
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 2002.
An additional equity incentive is provided by the Corporation's
Employee Stock Ownership Plan, to which the Corporation contributed 5.0% of each
participating employee's covered compensation for the fiscal year ended March
31, 2002, a decrease from the 7.5% of covered compensation contributed in the
previous fiscal year.
Compensation Committee
James M. Nolan, Chairman
Graeme W. Henderson
John H. Wilson
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.
Summary Compensation Table
The following table sets forth summary information regarding the
compensation (excluding retirement benefits) earned by or paid to William R.
Thomas, President and Chairman of the Board; Gary L. Martin, Vice President;
Patrick F. Hamner, Vice President; and William M. Ashbaugh, Vice President, all
of whom are officers of the Corporation whose total compensation earned during
the fiscal year ended March 31, 2002 exceeded $100,000.
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Annual Compensation
----------------------------------------
Name and Fiscal Other Annual All Other
Principal Position Year Salary Bonus Compensation(1) Compensation(2)
- ------------------ ------ -------- -------- --------------- ---------------
William R. Thomas 2002 $250,000 $ 10,417 $ 8,500 $ --
Chairman of the 2001 250,000 10,417 12,750 --
Board and President 2000 250,000 10,417 16,000 --
Gary L. Martin 2002 178,800 17,077 -- --
Vice President 2001 172,500 16,683 -- --
2000 169,500 22,380 -- 3,200
Patrick F. Hamner 2002 172,500 37,500 -- 8,500
Vice President 2001 145,000 42,250 -- 12,750
2000 126,252 50,417 2,027 13,973
William M. Ashbaugh 2002 96,410 14,222 -- --
Vice President 2001 -- -- -- --
2000 -- -- -- --
- ------------------
(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 portfolio companies (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 Ashbaugh 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, 2002 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.
9
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) $268,917 (3) (4)
Director, Chairman
and President
Gary L. Martin (1) 195,877 (3) (4)
Director and Vice
President
Patrick F. Hamner (1) 218,500 (3) (4)
Vice President
Graeme W. Henderson (2) 28,000 None None
Director
James M. Nolan (2) 26,000 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, 2002. 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, 2002. After deducting the
expense of the unfunded Retirement Restoration Plan, the Corporation's
net benefit attributable to both plans was $504,536 for the year ended
March 31, 2002. The Corporation's net benefit is not allocated to
individual plan participants.
(4) Individual retirement benefits are based on formulas relating benefits
to average final compensation and years of credited service. See
Retirement Plans which includes both a table of estimated annual
retirement benefits and a description of the retirement benefits
currently payable to Mr. Thomas.
10
Option Grants in Last Fiscal Year
Number of Potential Realizable Value
Securities % of Total at Assumed Annual Rates of
Underlying Options Granted Stock Price Appreciation
Options to Employees Exercise Expiration for Option Term (2)
Name Granted (1) in Fiscal Year Price ($/Sh) Date 5% (3) 10% (4)
- ---- ----------- -------------- ------------ ---- ------ -------
Patrick F. Hamner 10,000 22.7% $65.00 7/16/11 $408,782 $1,035,933
William M. Ashbaugh 15,000 34.1% 65.70 8/27/11 619,776 1,570,633
(1) Mr. Hamner's options become exercisable in five equal annual
installments beginning July 16, 2002 and Mr. Ashbaugh's options become
exercisable in ten equal annual installments beginning August 27, 2002.
(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 $105.88
at July 16, 2011 and $107.02 at August 27, 2011.
(4) Represents an assumed market price per share of common stock of $168.59
at July 16, 2011 and $170.41 at August 27, 2011.
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 2002.
11
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired on Value Options at 3/31/02 at 3/31/02 (2)
Name Exercise (#) Realized (1) Exercisable(#) Unexercisable(#) Exercisable Unexercisable
- ---- ------------ ------------ -------------- ---------------- ----------- -------------
William R. Thomas - - 4,800 1,200 $ - $ -
Gary L. Martin - - 14,000 - $463,750 $ -
Patrick F. Hamner - - 16,500 17,500 463,750 -
William M. Ashbaugh - - - 15,000 - -
- ----------------
(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 28, 2002 ($68.75) 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 portfolio companies as such amounts cannot readily be separately or
individually calculated. Messrs. Hamner, Martin 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 and Thomas had 20, 29 and 40 years,
respectively, of credited service under the plan as of May 1, 2002. All
calculations assume retirement in 2002 at age 65 (normal retirement age).
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Total Covered Estimated Annual Benefits
Compensation Based on Service of:
15 Years 20 Years 25 Years 30 Years 35 Years
-------- -------- -------- -------- --------
$125,000............. $ 31,779 $ 42,372 $ 52,965 $ 63,558 $ 74,151
150,000............. 38,904 51,872 64,840 77,808 90,776
175,000............. 46,029 61,372 76,715 92,058 107,401
200,000............. 53,154 70,872 88,590 106,308 124,026
225,000............ 60,279 80,372 100,465 120,558 140,651
250,000............ 67,404 89,872 112,340 134,808 157,276
300,000............ 81,654 108,872 136,090 163,308 190,526
350,000............. 95,904 127,872 159,840 191,808 223,776
400,000............. 110,154 146,872 183,590 220,308 257,026
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
portfolio companies 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 portfolio
companies 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 portfolio companies in
which Mr. Hamner participates. 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
13
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
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.
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, 2002.
AUDIT AND OTHER FEES
The aggregate fees for professional services rendered by KPMG LLP for
the audit of the Corporation's annual consolidated financial statements for the
year ended March 31, 2002, and the reviews of the financial statements included
in the quarterly Reports on Forms 10-Q for the year ended March 31, 2002, were
$40,500. Non-audit fees of $3,900 for the year ended March 31, 2002 consisted of
tax services. The Audit Committee has considered whether the provision by KPMG
LLP of non-audit services are compatible with maintaining KPMG LLP's
independence.
14
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
Nasdaq Total Return (U.S.) Nasdaq Financial Stocks Capital Southwest Corporation
1997 100.000 100.000 100.000
1998 151.573 155.678 142.215
1999 204.794 140.283 111.250
2000 380.907 132.946 85.640
2001 152.338 147.034 102.813
2002 153.408 183.007 109.777
15
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, 2003, 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, 2003, 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 2003 ANNUAL MEETING
Any shareholder proposal to be considered by the Corporation for
inclusion in the proxy material for the 2003 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, 2003. 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, 2002 accompanies this proxy statement, but is not deemed a part of the proxy
soliciting material.
A copy of the fiscal 2002 Form 10-K report to the Securities and
Exchange Commission will be mailed to shareholders without charge upon written
request to Susan K. Hodgson, Secretary, Capital Southwest Corporation, 12900
Preston Road, Suite 700, Dallas, Texas 75230.
16
Appendix A
Capital Southwest Corporation
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- JULY 15, 2002
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 15, 2002, 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
Gary L. Martin
1. Election of James M. Nolan
Directors ____ ___ William R. Thomas
John H. Wilson
(INSTRUCTION: To withhold authority to vote
for 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.
________________________ ________________________ ____________________
Signature of Shareholder Signature of Shareholder Title, if applicable
Date: ________________, 2002
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.