NIMBUS CD INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 5, 1997
TO THE STOCKHOLDERS OF
NIMBUS CD INTERNATIONAL, INC.:
The Annual Meeting of Stockholders of Nimbus CD International, Inc., a
Delaware corporation (the "Company"), will be held on August 5, 1997, at 10:00
a.m. Eastern Time, in the Ballroom at The Boar's Head Inn, Route 250 West,
Charlottesville, Virginia 22903, for the following purposes:
1. To elect ten (10) directors for a term of one year;
2. To ratify the selection of Coopers & Lybrand L.L.P. as the
Company's independent accountants for the current year; and
3. To transact such other business as may properly come before the
meeting or any continuation or adjournment thereof.
Only stockholders of record at the close of business on June 5, 1997, will
be entitled to receive notice of and to vote at the Annual Meeting and any
adjournment thereof. The transfer books will not be closed.
PLEASE FILL IN, DATE, AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED RETURN ENVELOPE, WHICH DOES NOT REQUIRE ANY POSTAGE IF MAILED IN
THE UNITED STATES. IF YOU RECEIVE MORE THAN ONE PROXY BECAUSE YOU OWN SHARES
REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH PROXY SHOULD BE COMPLETED AND
RETURNED.
By Order of the Board of Directors
July 8, 1997 L. Steven Minkel, Secretary
ANNUAL MEETING OF STOCKHOLDERS
OF
NIMBUS CD INTERNATIONAL, INC.
AUGUST 5, 1997
PROXY STATEMENT
GENERAL INFORMATION
General
The Annual Meeting of Stockholders of NIMBUS CD INTERNATIONAL, INC., a
Delaware corporation (the "Company"), will be held on August 5, 1997, at the
time and place and for the purposes set forth in the Notice of Annual Meeting of
Stockholders accompanying this Proxy Statement. The enclosed form of proxy is
solicited on behalf of the Board of Directors of the Company in connection with
such meeting and any continuation or adjournment thereof. This Proxy Statement
and the enclosed form of proxy are first being sent or given to the stockholders
on or about July 8, 1997. The executive offices of the Company are located at
623 Welsh Run Road, Guildford Farm, Ruckersville, Virginia 22968.
At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the election of ten (10) nominees for director ("Proposal
No. 1"). In addition, the stockholders of the Company will be asked to ratify
the Company's selection of Coopers & Lybrand L.L.P. ("Coopers") as the Company's
independent accountants for the current year ("Proposal No. 2").
Voting By Proxy
If a proxy in the enclosed form is duly executed and returned, the shares
of the Company's Common Stock, par value $0.01 per share (the "Common Stock"),
represented thereby will be voted, where specification is made by the
stockholder on the form of proxy, in accordance with such specification. If no
directions to the contrary are indicated, the persons named in the enclosed
proxy will vote the shares represented thereby "FOR" the election of each of the
named nominees for director and "FOR" each of the other proposals listed on the
proxy card. If necessary, and unless the shares represented by the proxy are
voted against the proposals herein, the persons named in the enclosed proxy may
also vote in favor of a proposal to recess the Annual Meeting and to reconvene
it on a subsequent date or dates without further notice, in order to solicit and
obtain sufficient votes to approve the matters being considered at the Annual
Meeting. Any stockholder may revoke his proxy by delivery of a new, later dated
proxy or by providing written notice of revocation to the Secretary of the
Company at any time before it is voted. A proxy will not be voted if the
stockholder attends the meeting and elects to vote in person.
Voting at the Annual Meeting; Record Date
Only stockholders of record at the close of business on June 5, 1997 have
the right to receive notice of and to vote at the Annual Meeting and any
adjournment thereof. As of that date, 20,870,579 shares of Common Stock were
outstanding. Each holder of record of Common Stock is entitled to one vote for
each share held on all matters voted upon.
Quorum; Required Vote
Presence in person or by proxy of the holders of 10,435,290 shares of
Common Stock will constitute a quorum at the Annual Meeting. Assuming the
applicable quorum is present, the affirmative vote of a plurality of the shares
of Common Stock represented at the Annual Meeting and entitled to vote will be
required to act upon the election of a nominee for director, and the affirmative
vote by the holders of a majority of the shares of Common Stock represented at
the Annual Meeting and entitled to vote will be required to act on all other
matters to come before the Annual Meeting, including Proposal No. 2.
With regard to Proposal No. 1, stockholders may vote in favor of all
nominees, withhold their votes as to all nominees or withhold their votes as to
specific nominees. With respect to Proposal No. 2, stockholders may vote in
favor of or against such proposal or ratification, or they may abstain from
voting. In accordance with applicable law, the treatment and effect of
abstentions and broker non-votes are as follows. If a stockholder registers an
abstention vote by checking the "ABSTAIN" box on the proxy card, no favorable
vote is cast and therefore the abstention vote has the same legal effect as a
vote against the proposal, even though the stockholder may interpret such action
differently. If a broker or other nominee holding shares of Common Stock for
beneficial owners has voted on one or more matters pursuant to discretionary
authority or instructions from beneficial owners, but does not vote on other
matters because the broker or nominee has not received instructions from
beneficial owners and does not have the right to exercise discretionary voting
power, such broker non-votes have no effect on the vote with respect to such
other matters. That is, broker non-votes are not counted as votes for the
proposal or as votes against the proposal and are not counted in determining the
number of votes needed in order for a proposal to be approved.
Other Matters
The enclosed form of proxy confers discretionary authority to vote with
respect to any and all of the following matters that may come before the Annual
Meeting: (a) matters which may be presented at the Annual Meeting at the request
of public stockholders and with respect to which the Company has not received
notice at the date hereof; (b) approval of the minutes of a prior meeting of
stockholders, if such approval does not amount to ratification of the action
taken at the meeting; (c) the election of any person to any office for which a
bona fide nominee is unable to serve or for good cause will not serve; (d) any
proposal omitted from the Proxy Statement and the form of proxy pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, as amended; and (e) matters
incident to the conduct of the Annual Meeting. The Board of Directors currently
is not aware of any matters (other than procedural matters) which will be
brought before the Annual Meeting and which are not referred to in the enclosed
Notice of Annual Meeting. If any such matters are properly brought before the
Annual Meeting, the persons named in the enclosed form of proxy will vote in
accordance with their best judgment.
Expenses of Solicitation
The costs of soliciting proxies will be borne by the Company. In addition
to solicitation by mail, certain directors, officers, and employees of the
Company may solicit proxies in person or by telephone, telegraph, or mail.
Further, the Company will also request record holders of Common Stock who are
brokerage firms, custodians, and fiduciaries to forward proxy material to the
beneficial owners of such shares and upon request will reimburse such record
holders for the costs of forwarding the material in accordance with customary
charges.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 5, 1997, as to shares of
Common Stock owned by (i) each person who is known by the Company to own
beneficially more than five percent of the Company's Common Stock, (ii) each
nominee for director of the Company, (iii) each executive officer named in the
Summary Compensation Table, and (iv) all directors and officers as a group,
together with their respective percentages.
AMOUNT AND NATURE % OF CLASS
NAME OF PERSON OR OF BENEFICIAL (IF MORE
NUMBER OF PERSONS IN GROUP OWNERSHIP (1) THAN 1%) (2)
-------------------------- ------------- ------------
McCown De Leeuw & Co. III, L.P.(3) 7,528,901 36.1
McCown De Leeuw & Co. Offshore (Europe) 7,528,901 36.1
III, L.P. (3)
McCown De Leeuw & Co. III (Asia), L.P. (3) 7,528,901 36.1
Gamma Fund LLC (3) 7,528,901 36.1
Behrman Capital L.P. (4) 3,670,067 17.6
Behrman Capital "B" L.P. (4) 3,670,067 17.6
Strategic Entrepreneur Fund, L.P. (4) 3,670,067 17.6
Charles Ayres (3) 7,528,901 36.1
Darryl G. Behrman (4) 3,670,067 17.6
Grant G. Behrman (4) 3,670,067 17.6
Robert M. Davidson (5) 3,333 *
David E. De Leeuw (3)(6) 7,532,901 36.1
Anthony V. Dub (7) 15,833 *
Lyndon J. Faulkner (8) 410,101 1.9
George E. McCown (3) 7,528,901 36.1
Glenn S. McKenzie (9) 1,000 *
L. Steven Minkel (10) 283,526 1.4
Robert J. Headrick (11) 37,616 *
Howard G. Nash (12) 87,457 *
David J. Trudel (13) 4,000 *
All directors and executive officers as a 12,045,834 56.0
group (13 persons)(14)
- - ----------------
* Less than one percent of the issued and outstanding shares of
Common Stock.
(1) The amount and percentage of securities beneficially owned by an
individual are determined in accordance with the definition of beneficial
ownership set forth in the regulations of the Securities and Exchange
Commission and, accordingly, may include securities owned by or for, among
others, the spouse and/or minor children of the individual and any other
relative who has the same home as such individual, as well as other
securities as to which the individual has or shares voting or investment
power or has the right to acquire within 60 days after June 5, 1997.
Beneficial ownership may be disclaimed as to certain of the securities.
Unless otherwise indicated, the persons and entities named have sole
voting and dispositive power over their shares.
(2) Individual percentages have been rounded. Shares subject to outstanding
stock options or warrants which the individual has the right to acquire
within 60 days after June 5, 1997, are deemed to be outstanding for the
purpose of computing the percentage of outstanding securities of the class
owned by such individual, or any group including such individual, but are
not deemed outstanding for the purpose of computing the percentage of the
class owned by any other individual.
(3) Includes 6,098,412 shares owned by McCown De Leeuw & Co. III, L.P., an
investment partnership whose general partner is MDC Management Company
III, L.P. ("MDC III"), 1,054,046 shares held by McCown De Leeuw & Co.
Offshore (Europe) III, L.P., an investment partnership whose general
partner is MDC Management Company IIIE, L.P. ("MDC IIIE"), 112,931 shares
held by McCown De Leeuw & Co. III (Asia), L.P., an investment partnership
whose general partner is MDC Management Company IIIA, L.P. ("MDC IIIA"),
and 263,512 shares owned by Gamma Fund LLC, a California limited liability
company ("Gamma"). The voting members of Gamma are George E. McCown, David
E. De Leeuw, David E. King, Robert B. Hellman, Jr., Charles Ayres and
Steven Zuckerman, who are also the only general partners of MDC III, MDC
IIIE and MDC IIIA. Messrs. McCown, De Leeuw and Ayres are nominated for
re-election to the Company's Board of Directors. Messrs. King and Hellman
declined to be nominated for re-election. Voting and dispositive decisions
regarding the Common Stock owned by MDC III, MDC IIIE and MDC IIIA are
made by Messrs. McCown and De Leeuw, as Managing General Partners of each
of such partnerships, who together have more than the required
two-thirds-in-interest vote of the Managing General Partners necessary to
effect such decisions on behalf of any such entity. Voting and dispositive
decisions regarding the Common Stock owned by Gamma are made by a vote or
consent of a majority in number of the members of Gamma. No general
partner is able to individually direct the voting or disposition of Common
Stock beneficially owned by MDC III, MDC IIIE and MDC IIIA. Messrs.
McCown, King, Hellman, Ayres and Zuckerman have no direct ownership of any
shares of Common Stock and, together with Mr. De Leeuw, disclaim
beneficial ownership of any shares of Common Stock owned by MDC III, MDC
IIIE, MDC IIIA and Gamma except to the extent of their proportionate
partnership interests or membership interests (in the case of Gamma). The
address of each of MDC III, MDC IIIE, MDC IIIA and Gamma is c/o McCown De
Leeuw & Co., 3000 Sand Hill Road, Building 3, Suite 290, Menlo Park,
California 94025.
(4) Includes 3,306,037 shares owned by Behrman Capital L.P., an investment
partnership whose general partner is Behrman Brothers, L.P., and 298,278
shares owned by Behrman Capital "B" L.P., an investment partnership whose
general partner is Behrman Brothers, L.P., and 65,751 shares owned by
Strategic Entrepreneur Fund, L.P., an investment partnership whose general
partners are Darryl G. Behrman and Grant G. Behrman. Darryl Behrman and
Grant Behrman are the only general partners of each of Behrman Brothers,
L.P. and Strategic Entrepreneur Fund, L.P., and, as such, each may make
voting and dispositive decisions regarding the Common Stock. Messrs.
Darryl Behrman and Grant Behrman have no direct ownership of any shares of
Common Stock and disclaim beneficial ownership of any shares of Common
Stock except to the extent of their proportionate partnership interests.
The address of Behrman Capital is c/o Behrman Capital L.P., 126 East 56th
Street, New York, New York 10022.
(5) Includes 3,333 shares subject to stock options.
(6) Includes 3,000 shares held for the benefit of Mr. De Leeuw in the MDC
Management Company, Inc. Retirement Savings and Investment Plan of which
Mr. De Leeuw is the manager. Also includes 1,000 shares held in trust
for the benefit of Brian De Leeuw, Mr. De Leeuw's son, of which Treva De
De Leeuw, Mr. De Leeuw's wife, serves as trustee. Mr. De Leeuw disclaims
beneficial ownership of the shares held in trust for the benefit of
Brian De Leeuw.
(7) Includes 833 shares subject to stock options.
(8) All shares are subject to stock options.
(9) Mr. McKenzie is a consultant to McCown De Leeuw & Co.
(10) Includes 108,171 shares subject to stock options. Also includes 500
shares owned by each of Lewis C. Minkel and Carter P. Minkel, Mr.
Minkel's adult sons, of which Mr. Minkel expressly disclaims beneficial
ownership. Mr. Minkel has been nominated for election as a director.
(11) All shares are subject to stock options.
(12) All shares are subject to stock options
(13) All shares are subject to stock options.
(14) Includes 651,511 shares issuable upon the exercise of stock options and
11,198,968 shares beneficially owned by the MDC Entities and Behrman
Capital.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
Action will be taken at the meeting to elect a Board of Directors of ten
(10) persons. Unless otherwise directed on the form of proxy, shares represented
by proxies solicited by the Board of Directors will be voted in favor of the
election as directors of all of the nominees named below, or, in the event that
any such nominee should become unavailable for any reason, which is not
presently anticipated, such proxies will be voted for a substitute nominee. The
persons elected as directors will hold office until the 1998 Annual Meeting of
Stockholders and until their successors are duly elected and qualified.
At a meeting of the Company's Board of Directors (the "Board") held on May
21, 1997, the Bylaws of the Company were amended to provide for a Board of
Directors consisting of a minimum of eight (8) and a maximum of thirteen (13)
persons. In addition, the Board determined that the number of directors would be
ten (10).
Mr. David B. Wilson resigned from the Board on August 21, 1996.
Messrs. Robert B. Hellman, Jr. and David E. King, both partners of McCown De
Leeuw & Co., have declined to be nominated for re-election. In addition to
the current directors who will stand for reelection, Mr. L. Steven Minkel,
Executive Vice President, Chief Financial Officer and Secretary of the
Company, has been nominated to become a director. Mr. Minkel served as a
director of the Company from November, 1992 through March, 1995.
Stream International Holdings Inc. ("Stream") previously had the right
to designate a representative to serve on the Board of Directors. Under the
terms and conditions of a new agreement with Stream, Stream no longer has
such right.
Information about Mr. Minkel and the nominees for reelection as
directors is set forth below.
Nominees for Director
The Board of Directors has nominated the following persons for election as
directors:
DIRECTOR
NOMINEE AGE SINCE
-------------------------------------------------
Lyndon J. Faulkner 36 1992
-------------------------------------------------
Charles Ayres 37 1995
-------------------------------------------------
Darryl G. Behrman 46 1995
-------------------------------------------------
Grant G. Behrman 43 1995
-------------------------------------------------
Robert M. Davidson 54 1994
-------------------------------------------------
David E. De Leeuw 53 1995
-------------------------------------------------
Anthony V. Dub 47 1996
-------------------------------------------------
George E. McCown 61 1995
-------------------------------------------------
Glenn S. McKenzie 44 1995
-------------------------------------------------
L. Steven Minkel 55 -
-------------------------------------------------
LYNDON J. FAULKNER. President, Chief Executive Officer and Director
since October 1992, Chairman of the Board of Directors since March 1995 and
Treasurer since August 1996. Mr. Faulkner was employed in various capacities
by Nimbus Records Limited (the "Predecessor") from 1985 until October 1992,
most recently as Manufacturing Director. Mr. Faulkner was initially
responsible for the design and development of the manufacturing process
utilized by the Predecessor. Mr. Faulkner was educated in electrical and
electronic engineering in the United Kingdom. Mr. Faulkner is a director of
Tad Coffen Performance Saddles Inc., a privately owned company.
CHARLES AYRES. Director of the Company since March 1995. Mr. Ayres is
a general partner of MDC Management Company III, L.P., which is the general
partner of McCown De Leeuw & Co. III, L.P. and McCown De Leeuw & Co. Offshore
(Europe) III, L.P., a general partner of MDC Management Company IIIA, L.P.,
which is the general partner of McCown De Leeuw & Co. III (Asia), L.P. and a
member of Gamma Fund, LLC. Mr. Ayres has been affiliated with McCown De
Leeuw & Co., an affiliate of McCown De Leeuw & Co. III, L.P., since 1991.
Prior to that he was a founding general partner of HMA Investments, Inc., a
private investment firm focused on middle-market management buyouts. He
currently is a director of certain privately held companies, including Tiara
Motorcoach Corporation and Papa Gino's, Inc.
DARRYL G. BEHRMAN. Director of the Company since March 1995. Mr.
Behrman is a general partner of Behrman Brothers, L.P., the general partner
of Behrman Capital L.P. and Behrman Capital "B" L.P. The Behrman Capital
entities are private investment funds focused on management buyouts of
emerging growth companies. Prior to founding Behrman Capital in 1992, Mr.
Behrman was a partner at Wertheim Schroder & Co. Incorporated where he
specialized in middle market mergers and acquisitions, recapitalizations and
management buyouts. Prior to that he worked for Citicorp's Merchant Banking
Group where he served as Vice President and head of the Corporate Advisory
Group in London. Mr. Behrman is a director of several privately held
companies including Condor Systems, Inc. and Professional Dental Associates,
Inc. He is Chairman of the Board of Esoterix, Inc., a privately held
company. Darryl Behrman and Grant Behrman are brothers.
GRANT G. BEHRMAN. Director of the Company since March 1995. Mr.
Behrman is a general partner of Behrman Brothers, L.P., the general partner
of Behrman Capital L.P. and Behrman Capital "B" L.P. The Behrman Capital
entities are private investment funds focused on management buyouts of
emerging growth companies. Prior to founding Behrman Capital in 1992, Mr.
Behrman was employed for ten years by Morgan Stanley & Co. Incorporated, most
recently as a general partner in its Venture Capital Group. Mr. Behrman is a
Director of several privately held companies including Esoterix, Inc., Condor
Systems, Inc. and Visual Networks, Inc. Darryl Behrman and Grant Behrman are
brothers.
ROBERT M. DAVIDSON. Director of the Company since July 1994. Since
February, 1997, Mr. Davidson has been Chairman and Chief Executive Officer of
the Davidson Group, a privately held investment company. From 1989 to February
1997, Mr. Davidson was Chairman of the Board of Directors and Chief Executive
Officer of Davidson & Associates, Inc., a publicly-held educational software
company that develops, publishes and manufactures high quality educational
software products for home and school use. Mr. Davidson held senior management
positions at The Parsons Corporation, a large engineering and construction
company, from 1978 to 1989. During his last five years at Parsons, he served as
Executive Vice President, and was responsible for managing a major portion of
the firm's operations and overseeing acquisitions of businesses and new
technologies.
DAVID E. DE LEEUW. Director of the Company since March 1995. Mr. De
Leeuw is a managing general partner of MDC Management Company III, L.P.,
which is the general partner of McCown De Leeuw & Co. III, L.P. and McCown De
Leeuw & Co. Offshore (Europe) III, L.P., a managing general partner of MDC
Management Company IIIA, L.P., which is the general partner of McCown De
Leeuw & Co. III (Asia), L.P. and a member of Gamma Fund, LLC. Mr. De Leeuw
was the co-founder in 1984 of McCown De Leeuw & Co., Inc., an affiliate of
McCown De Leeuw & Co. III, L.P. He currently serves as a director of Vans,
Inc., a publicly held company, and certain privately held companies including
Papa Gino's Inc. and DEC International, Inc.
ANTHONY V. DUB. Director of the Company since May 1996. Mr. Dub is a
Managing DirectorBSenior Advisor of Credit Suisse First Boston, an
international investment banking firm with headquarters in New York City.
Mr. Dub joined Credit Suisse First Boston in 1971 and was named a Managing
Director in 1981. He currently serves as a director of Lomak Petroleum,
Inc., a publicly held company.
GEORGE E. MCCOWN. Director of the Company since March 1995. Mr.
McCown is a managing general partner of MDC Management Company III, L.P.,
which is the general partner of McCown De Leeuw & Co. III, L.P., and McCown
De Leeuw & Co. Offshore (Europe) III, L.P., a managing general partner of MDC
Management Company IIIA, L.P., which is the general partner of McCown De
Leeuw & Co. III (Asia), L.P. and a member of Gamma Fund, LLC. Mr. McCown was
the co-founder in 1984 of McCown De Leeuw & Co., an affiliate of McCown De
Leeuw & Co. III, L.P. He serves as Chairman of the Board of BMC West
Corporation, and as Vice Chairman of Vans, Inc., both publicly held companies.
GLENN S. MCKENZIE. Director of the Company since March 1995. Mr. McKenzie
has been President of Alpha Investments, Inc., a management consulting firm,
since October 1991. He currently serves as a director of Fibermark, Inc., a
publicly held company, and DEC International, Inc., a privately held company.
L. STEVEN MINKEL Executive Vice President, Chief Financial Officer, and
Secretary since November 1992. Before joining the Company, from February
1986 to October 1992, Mr. Minkel was Vice President and Chief Financial
Officer of Duchossois Industries, Inc., a privately owned manufacturing
conglomerate. Mr. Minkel served as a director of the Company from November
1992 through March 1995.
Board Meetings
The Board of Directors met six times during fiscal 1997. All such meetings
were special meetings. All directors, except Mr. King, attended at least 50% of
the aggregate number of meetings of the Board of Directors and standing
Committees on which they served. Mr. King attended no meetings of the Board
during fiscal 1997.
Committees
The Board of Directors has an Executive Committee comprised of the Chief
Executive Officer and two non-employee directors, an Audit Committee comprised
of three non-employee directors and a Compensation Committee comprised of four
directors, two of whom the Company has deemed to be independent.
The Executive Committee held monthly meetings during fiscal 1997. The
Executive Committee is authorized, within parameters and limitations set out by
the Company's Board of Directors, to meet and act on behalf of the Board during
interim periods between regular meetings of the Board. During fiscal 1997, the
members of the Executive Committee included Messrs. Faulkner, Ayres and G.
Behrman.
The Audit Committee held two meetings during fiscal 1997. Its principal
functions are to recommend the firm of independent accountants to serve the
Company each fiscal year to the Board of Directors and to review the plan and
results of the prior year's audit by the independent accountants as well as the
scope, results, and adequacy of the Company's internal accounting controls and
procedures. In addition, the Audit Committee reviews the independence of the
accountants and reviews their fees for audit and non-audit services rendered to
the Company. During fiscal 1997, the members of the Audit Committee included
Messrs. Davidson, Dub, McKenzie and, until his resignation, Wilson.
The Compensation Committee held three meetings during fiscal 1997. Its
principal functions are to approve remuneration of the officers of the Company,
review certain benefit programs, and approve and administer remuneration plans,
including the stock incentive plans of the Company. The Report of the
Compensation Committee on executive compensation is set forth on page 14 of this
Proxy Statement. During fiscal 1997, the members of the Compensation Committee
included Messrs. Ayres, D. Behrman, Davidson, Dub, and, until his resignation,
Wilson.
Compensation of Directors
Beginning November 1995, the Company began paying an annual fee of $10,000
to directors of the Company who are not compensated as officers of the Company
or employed by an affiliate of the Company, including the MDC Entities and
Behrman Capital. The Company also reimburses each director for out-of-pocket
expenses incurred in attending meetings of the Board of Directors and its
committees.
In addition, in October 1995, the Board of Directors, with the approval of
the stockholders, adopted the Nimbus CD International, Inc. 1995 Stock Option
Plan for Non-Employee Directors (the "Directors' Plan"). The Directors' Plan is
designed to attract and retain the services of experienced and highly qualified
outside directors and to create a proprietary interest for such directors in the
Company's continued success. Under the Directors' Plan, grants of stock options
will be made to each member of the Board, who is (a) not an employee of the
Company, (b) not an employee of an affiliate of the Company, and (c) otherwise
not eligible for selection to participate in any plan of the Company or its
affiliates that entitles such member to acquire securities or derivative
securities of the Company. An aggregate of 50,000 shares of Common Stock have
been reserved for issuance under the Directors' Plan. Notwithstanding the
foregoing, adjustments may be made by the Company's Board of Directors in the
number and class of shares available under the Directors' Plan and the number,
class and price of shares subject to outstanding option grants, in each such
case, to reflect changes in the Company's corporate structure or capitalization,
such as through a merger or stock split.
Options awarded under the Directors' Plan expire ten years from the date
of grant (unless the period is shortened by the non-employee independent
director's retirement, death, disability or a change of control as defined in
the Directors' Plan). Options awarded subsequent to October 31, 1995 will permit
the non-employee independent director, for a period of up to ten years from the
date of grant (unless the period is shortened by the non-employee independent
director's retirement, death, disability or a change in control as defined in
the Directors' Plan), to purchase 2,500 shares of Common Stock from the Company
at the fair market value of such shares on the date such option is granted.
Each non-employee independent director will be granted such an option
whenever he or she is elected, re-elected or appointed to the Company's Board of
Directors and otherwise satisfies the requirements for participation in the
Directors' Plan. Generally, an option shall only be exercisable with respect to
one-third of the shares subject to the option on the first anniversary of the
date of grant (and not prior thereto) and then with respect to an additional
one-third of such shares beginning on each of the second and third anniversaries
of the date of grant; provided, however, the option shall be fully exercisable
upon (i) the attainment of age 70 by the optionee or (ii) the death or
disability (as defined in the Directors' Plan) of the optionee. Notwithstanding
the foregoing, in no event may an option under the Directors' Plan be exercised
prior to the expiration of six months from the date of grant. Except in certain
limited circumstances, an option may be exercised only if the optionee at the
time of exercise is, and at all times following the grant of the option remains,
a non-employee director of the Company.
On October 30, 1995, Robert M. Davidson was awarded options to purchase
10,000 shares of the Company's Common Stock at an exercise price equal to $7.00.
Such options vest ratably over a three year period with the first options
vesting on October 30, 1996. On May 20, 1996, upon his appointment to the
Company's Board of Directors, Anthony V. Dub was awarded options to purchase
2,500 shares of the Company's Common Stock at an exercise price of $11.25 per
share. Such options shall vest ratably over three years beginning May 20, 1997.
On August 6, 1996, upon their re-election to the Board, each of Messrs. Davidson
and Dub were granted options to purchase 2,500 additional shares of the
Company's Common Stock under the Directors' Plan at an exercise price of $12.63.
Such options shall vest ratably over three years beginning August 6, 1997.
The Directors' Plan will terminate upon the earlier to occur of (i) the
adoption of a resolution of the Company's Board of Directors terminating the
Directors' Plan, (ii) the date all shares of Common Stock subject to the
Directors' Plan are purchased according to the provisions of the Directors' Plan
provisions or (iii) ten years from the date of adoption of the Directors' Plan
by the Company's Board of Directors.
Executive Officers of the Company
The following table lists the executive officers of the Company and its
affiliates. All executive officers are appointed annually by, and serve at the
discretion of, the Board of Directors of the Company.
POSITION BUSINESS EXPERIENCE
NAME AND AGE WITH THE COMPANY DURING PAST FIVE YEARS
- - -------------------------------------------------------------------------------
Lyndon J. Faulkner (36) President, Chief *
Executive Officer,
Treasurer and Chairman
of the Board of
Directors
- - -------------------------------------------------------------------------------
L. Steven Minkel (55) Executive Vice *
President,
Chief Financial
Officer and Secretary
- - -------------------------------------------------------------------------------
Howard G. Nash (48) European Managing Mr. Nash has served as
Director, Nimbus European Managing Director
Manufacturing (UK) of Nimbus Manufacturing (UK)
Limited Limited since January 1994.
Prior to that time, he was
employed in various management
capacities, including Finance
Director, by Nimbus
Manufacturing (UK) Limited and
the Predecessor.
- - -------------------------------------------------------------------------------
David J. Trudel (46) Mr. Trudel has served as
Executive Vice Executive Vice President -
President - North North America Operations of
American Operations, Nimbus Manufacturing Inc.
Nimbus Manufacturing since June 1996. Prior to
Inc. June 1996, Mr. Trudel was
employed by General Electric
Corporation, most recently as
the General Manager of the
Electrical Distribution
Components business in
Plainville, Connecticut.
- - -------------------------------------------------------------------------------
Robert J. Headrick (39) President, Nimbus Mr. Headrick has served as
Information Systems, President of Nimbus
Inc., Executive Vice Information Systems, Inc.
President, Nimbus since March 1993 and as
Manufacturing Inc. Executive Vice President of
Nimbus Manufacturing Inc.
since March 1994. From 1987
to March 1993, Mr. Headrick
was employed by Sony
Corporation of America and
was named Vice President of
Sony Electronic Publishing
Company in October 1991.
- - -------------------------------------------------------------------------------
Robert J. Lynch (36) Vice President, Nimbus Mr. Lynch has served as Vice
Manufacturing Inc. President of Nimbus
Manufacturing Inc. since
March 1994. Prior to that
time, he was employed in
various management
capacities, including
Operations Manager, by
Nimbus Manufacturing Inc.
and the Predecessor.
- - -------------------------------------------------------------------------------
Gary E. Krutul (41) Controller and Chief Mr. Krutul has served as
Accounting Officer, Controller and Chief
Assistant Secretary Accounting Officer since
and Assistant Treasurer June 1995 and Assistant
Secretary and Assistant
Treasurer since August 1996.
From September 1991 to
February 1995, Mr. Krutul
served as Financial Manager
for Bally's Total Fitness,
Inc.
* See "Nominees for Director"
Family Relationships
Directors Grant and Darryl Behrman are brothers. Otherwise, there is no
family relationship between any director, executive officer, or person nominated
or chosen by the Company to become a director or executive officer.
Executive Compensation
The following sections disclose detailed information about cash and
equity-based executive compensation paid by the Company to certain of its
executive employees. The information is comprised of a stock performance graph,
a Report of the Compensation Committee of the Company's Board of Directors, a
Summary Compensation Table and additional tables which provide further details
on stock options issued by the Company.
Cumulative Total Stockholder Return
The following performance graph compares the cumulative total return,
assuming the reinvestment of dividends, for the period from October 26, 1995
through March 31, 1997, from an investment of $100 in (i) the Company's Common
Stock, (ii) the Nasdaq National Market Composite Index, and (iii) the Russell
2000 Index which is assembled by Frank Russell Company. The Company has chosen
the Russell 2000 Index for comparison because the Company does not believe that
it can reasonably identify a peer group or a published industry or
line-of-business index that contains companies in a similar line of business and
because the Russell 2000 Index includes companies with capitalizations similar
to that of the Company. No dividends have been declared or paid on the Company's
Common Stock.
Total Return Data Ending March 31
Nimbus CD International, Russell 2000 Index, NASDAQ Composite
10/26/95 3/31/96 3/31/97
----------------------------------------------
Nimbus CD International 1.613 23.809
Cumulative Data Points 100.000 101.613 125.806
10/26/95=100
Russell 2000 Index 13.056 5.107
Cumulative Data Points 100.000 113.056 118.830
10/26/95=100
NASDAQ Composite 8.238 11.172
Cumulative Data Points 100.000 108.238 120.330
10/26/95=100
The Nasdaq National Market Composite Index tracks the aggregate price
performance of equity securities of companies traded on the Nasdaq National
Market. The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "NMBS".
The performance of any individual company's common stock is influenced not
only by its own performance and future prospects, but also by a number of
external factors over which the company and its management have indirect or no
control, including general economic conditions, expectations for the company's
future performance and conditions affecting or expected to affect the company's
industry. In addition, stock performance can be affected by factors such as
trading volume, analytical research coverage by the investment community and the
propensity of stockholders to hold the stock for investment purposes. The
relative weight of these factors also changes over time. Consequently, stock
performance, including measurement against indices, may not be representative of
a company's financial performance for given periods of time.
Report of the Compensation Committee of the Board of Directors
During fiscal 1997, decisions on compensation for the Company's executive
officers were made by the Compensation Committee of the Board of Directors which
is composed of four directors who are not employed by the Company. At the
direction of the Board of Directors, the Compensation Committee is responsible
for determining salary and bonus plans for certain officers designated by the
Board, from time to time, and is responsible for approving all stock option
awards granted under the Amended and Restated Nimbus CD International, Inc. 1995
Stock Option and Stock Award Plan (as the same may be amended or modified, the
"Nimbus Plan"). For fiscal 1997, the Board directed the Compensation Committee
to review and approve salary and bonus awards for the Company's Chief Executive
Officer and Chief Financial Officer, the European Managing Director of Nimbus
Manufacturing (UK) Limited, the Vice President - Manufacturing of Nimbus
Manufacturing Inc., the Executive Vice President of Nimbus Manufacturing Inc.
and President of Nimbus Information Systems, Inc. and a new position, the
Executive Vice President North American Operations of Nimbus Manufacturing Inc.
The Compensation Committee's primary goal is to develop the Company's
compensation program so that it is related to creating shareholder value. The
Committee seeks to offer the Company's executive officers competitive
compensation opportunities based on their individual performance, the Company's
financial performance and their personal contribution to that performance.
Furthermore, the executive compensation program is designed to attract and
retain executive talent that contributes to the Company's long term success,
reward achievement of the Company's short-term and long-term strategic goals,
link executive officer compensation and shareholder interests through
equity-based plans, and recognize and reward individual contributions to Company
performance.
During fiscal 1997, the Compensation Committee determined salary levels
for executive officers by considering a number of factors, including: (i)
individual performance, (ii) functions performed by the executive officer, (iii)
scope of the executive officer's on-going duties, (iv) general changes in the
compensation peer group in which the Company competes for executive talent and
(v) the Company's financial performance in general. No single factor was
predominant in determining the salary level of any officer. Moreover, the
Committee did not weigh any single factor against another in a manner that made
it possible to assign a numerical value to the weight of any factor in
determining the percentage increase in salary of the executive officers.
On June 5, 1996, the Committee approved a 5% salary increase for Lyndon J.
Faulkner, the Company's Chief Executive Officer. Mr. Faulkner was not present
during the Committee's evaluation of his performance or its determination of his
salary level. The Committee relied on performance evaluations submitted by the
Executive Committee and the Chief Financial Officer as well as the other salary
criteria described above.
In addition, the Committee approved an employment agreement for Mr. Trudel
which provides for a base salary of not less than $181,000 and provides for an
initial term ending June 9, 1997. Thereafter, the agreement automatically renews
for additional six month periods until terminated in accordance with the
agreement. The agreement also provides for an annual bonus subject to the
achievement of annual performance criteria. The agreement may be terminated by
the Company with or without cause, provided that if it is terminated without
cause the Company is obligated to pay Mr. Trudel the greater of six months'
salary or all salary and benefits specified in the agreement from the date of
termination to the end of the then current term.
At its meeting on December 27, 1996, the Committee approved a 7.7%
salary increase for L. Steven Minkel, the Company's Chief Financial
Officer. Mr. Faulkner participated in the Committee's evaluation of Mr.
Minkel's performance and its discussion of the appropriate amount of Mr.
Minkel's salary increase. In addition, the Committee received additional
performance evaluations of Mr. Minkel from the Executive Committee.
At a meeting of the Committee held on April 1, 1997, the Committee
approved a salary increase of 10% for Howard Nash, European Managing Director,
Nimbus Manufacturing (UK) Limited. Mr. Faulkner provided the Committee with an
evaluation of Mr. Nash's performance and participated in the discussion with
regard to the amount of the salary increase. Salary increases were not
considered by the Committee for Messrs. Headrick, Lynch and Trudel during fiscal
1997.
In order to increase incentives for exceptional performance, a portion of
each executive officer's compensation is paid in the form of contingent cash
bonuses which are paid annually. The bonus amounts for executive officers are
dependent in part on the Company's financial performance, as well as
individualized criteria such as achievement of specific goals for the Company
and/or its subsidiaries and satisfactory completion of special projects
supervised by the Chief Executive Officer. The Company's financial performance
objectives must be achieved before individual objectives are evaluated. For
fiscal 1997, no bonuses were paid to Messrs. Faulkner, Minkel, Trudel or
Headrick because the financial performance objectives established for those
officers were not achieved. Mr. Nash was awarded a $32,000 bonus based on 100%
performance against stated objectives.
Stock options serve to further align the interests of management and the
Company's stockholders by providing executive officers with an opportunity to
benefit from stock price appreciation that can be expected to accompany improved
financial performance. Options also enhance the Company's ability to attract and
retain executives. The number of option shares granted and the other terms of
such options, such as the vesting period, are determined by the Committee, based
on recommendations of management in light of, among other factors, each
executive officer's level of responsibility, prior performance and other
compensation. However, the plan does not provide any quantitative method for
weighing these factors, and a decision to grant an award is based primarily upon
an evaluation of past as well as future anticipated performance and
responsibilities of each executive officer.
On May 20, 1996, Messrs. Faulkner and Minkel were awarded options to
purchase 15,000 and 12,000 shares of the Company's Common Stock, respectively,
at a purchase price equal to $11.25. These options will vest ratably over a five
year period, with one-fifth of the options vesting on May 31, 1996, and each May
31 thereafter. On June 5, 1996, on the recommendation of the Chief Executive
Officer, the Compensation Committee awarded options to purchase an aggregate of
178,500 shares of the Company's Common Stock at a purchase price of $16.50 to 45
senior managers of the Company. Such options will vest ratably over a five year
period with the first one-fifth vesting on March 31, 1997. Of these options,
Messrs. Faulkner, Minkel, Nash, and Trudel each received options to purchase
20,000 shares and Mr. Headrick received options to purchase 5,000 shares of the
Company's Common Stock. The Compensation Committee awarded these options to
provide further incentives to Company management to continue to increase the
Company's future performance and thereby enhance stockholder value.
Finally, on April 1, 1997, the Compensation Committee awarded
non-qualified stock options to purchase 187,000 shares of Common Stock at a
purchase price of $9.13 to 41 managers of the Company. Such options will vest
ratably over five years with the first one-fifth vesting on March 31, 1998. Of
these options, Messrs. Faulkner, Minkel, Nash, and Trudel each received options
to purchase 15,000 shares of the Company's Common Stock. After giving effect to
the above grants, there are 285,278 shares of Common Stock available to be
awarded under the Nimbus Plan.
For fiscal 1998, the Compensation Committee will be responsible for salary
levels and bonuses for all persons employed by the Company who are deemed by the
Board to be within the Securities and Exchange Commission's definition of
"executive officer". Specifically, the Board has designated the Company's Chief
Executive Officer and Chief Financial Officer, the Managing Director of Nimbus
Manufacturing (UK) Limited, the Executive Vice President of Nimbus Manufacturing
Inc. and President of Nimbus Information Systems, Inc. and the Executive Vice
President - North American Operations of Nimbus Manufacturing Inc.
To the extent appropriate, the Company intends to take the necessary steps
to conform its compensation practices to comply with the $1 million compensation
deduction cap under Section 162(m) of the Internal Revenue Code of 1986, as
amended.
Respectfully submitted:
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Charles Ayers
Darryl G. Behrman
Robert M. Davidson
Anthony V. Dub
Summary Compensation Table
The following summary compensation table presents information about the
compensation paid by the Company during its three most recent fiscal years to
those individuals who were (i) the Company's Chief Executive Officer (the "CEO")
at the end of the last completed fiscal year, regardless of compensation level
and (ii) the Company's four most highly compensated executive officers (three of
whom are officers of a subsidiary) other than the CEO who were serving as
executive officers at the end of the last completed fiscal year (collectively,
the "Named Executive Officers")
Summary Compensation Table:
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION
ALL
FISCAL OTHER OTHER
NAME AND YEAR ANNUAL OPTIONS COMPEN-
PRINCIPAL ENDED SALARY BONUS COMPENSATION GRANTED SATION
POSITION MARCH 31 ($) ($) ($)(2) (#)(3) ($)(4)
- - --------------------------------------------------------------------------------
Lyndon J. Faulkner 1997 242,550 0 0 35,000 11,752
President, Chief 1996 231,000 73,600 0 475,326 12,486
Executive Officer, 1995 210,000 80,000 0 251,035 11,541
Treasurer and
Chairman of the Board
of Directors
L. Steven Minkel 1997 191,260 0 0 32,000 9,992
Executive Vice 1996 177,876 73,600 0 316,821 9,070
President, Chief 1995 165,013 80,000 0 0 7,018
Financial Officer and
Secretary
David J. Trudel 1997 145,792 0 28,443 20,000 1,370
Executive Vice
President, Nimbus
Manufacturing Inc.
Robert J. Headrick 1997 180,180 0 0 5,000 7,265
President, Nimbus 1996 173,828 23,400 0 105,670 7,211
Information Systems, 1995 165,044 50,000 0 3,486 3,629
Inc., Executive Vice
President, Nimbus
Manufacturing Inc.
Howard G. Nash 1997 105,650 32,000 0 20,000 12,543
European Managing 1996 92,918 31,746 0 131,993 11,127
Director, Nimbus 1995 85,728 12,407 0 42,054 10,174
Manufacturing (UK)
Limited
(1) While each of the five Named Executive Officers received perquisites or
other personal benefits in the years shown, in accordance with Securities
and Exchange Commission regulations, the value of these benefits are not
indicated since they did not exceed the lesser of $50,000 or 10% of the
individual's salary and bonus in any year.
(2) The amount set forth in the Summary Compensation Table under the
heading "Other Annual Compensation" includes (i) $21,243 for
reimbursements made by the Company to Mr. Trudel or on behalf of Mr.
Trudel for relocation costs and (ii) $7,200 as an automobile allowance
on behalf of Mr. Trudel.
(3) In connection with the Recapitalization (as defined herein), Messrs.
Faulkner, Headrick, and Nash exchanged options for 251,035 shares, 3,486
shares, and 42,054 shares of Common Stock, respectively, for options
having substantially similar terms and provisions, issued under the Nimbus
Plan (as defined herein). No new options were granted to Named Executive
Officers by the Company in fiscal 1995.
(4) Amounts set forth in the Summary Compensation Table under the heading "All
Other Compensation" include (i) contributions made by the Company to the
Company's 401(k) plan or, in the case of Messrs. Faulkner and Nash, to the
Company's U.K. Pension Scheme for the benefit of the Named Executive
Officer and (ii) the Company's payment of life insurance premiums on
behalf of the Named Executive Officer. In fiscal 1997, the Company paid
$330, $2,250, $487, $330 in life insurance premiums on behalf of Messrs.
Faulkner, Minkel, Trudel and Headrick, respectively. In fiscal 1996, the
Company paid $330, $1,440, $330 in life insurance premiums on behalf of
Messrs. Faulkner, Minkel and Headrick, respectively. In fiscal 1995, the
Company paid $330, $1,440, $330 in life insurance premiums on behalf of
Messrs. Faulkner, Minkel and Headrick, respectively.
Employment Agreements
The Company has entered into employment agreements with Messrs. Faulkner,
Minkel, Trudel, Headrick and Nash. The employment agreement with Mr. Faulkner
provides for a base salary of not less than $200,000 and provides for an initial
term ended March 31, 1994 and for continuation thereafter for additional one
year periods until terminated in accordance with the agreement. The agreement
also provides for an annual bonus subject to the achievement of annual
performance criteria (such bonus for fiscal 1997 was $0). The agreement may be
terminated by the Company with or without cause, provided that if it is
terminated without cause the Company will be obligated to pay the greater of one
year=s salary plus the previous year=s bonus or all salary and benefits
specified in the agreement from the date of termination to the end of the then
current contract term.
The employment agreement with Mr. Minkel provides for a base salary of not
less than $150,000 and provides for an initial term ended November 8, 1994 and
for continuation thereafter for additional one year periods until terminated in
accordance with the agreement. The agreement also provides for an annual bonus
subject to the achievement of annual performance criteria (such bonus for fiscal
1997 was $0). The agreement may be terminated by the Company with or without
cause, provided that if it is terminated without cause the Company will be
obligated to pay the greater of one year's salary plus the previous year's bonus
or all salary and benefits specified in the agreement from the date of
termination to the end of the then current contract term.
The employment agreement with Mr. Trudel provides for a base salary of not
less than $181,000 and provides for an initial term ended June 9, 1997.
Thereafter, the agreement continues for additional six month periods until
terminated in accordance with the agreement. The agreement also provides for an
annual bonus subject to the achievement of annual performance criteria (such
bonus for fiscal 1997 was $0). The agreement may be terminated by the Company
with or without cause, provided that if it is terminated without cause the
Company is obligated to pay Mr. Trudel the greater of six months' salary or all
salary and benefits specified in the agreement from the date of termination to
the end of the then current term.
The employment agreement with Mr. Headrick provides for a base salary of
not less than $140,000 and provides for an initial term ended March 7, 1994.
Thereafter, the agreement continues for additional six month periods until
terminated in accordance with the agreement. The agreement also provides for an
annual bonus, subject to achievement of annual performance criteria (such bonus
for fiscal 1997 was $0). The agreement may be terminated by the Company with or
without cause, provided that if it is terminated without cause the Company is
obligated to pay Mr. Headrick the greater of six months' salary or all salary
and benefits specified in the agreement from the date of termination to the end
of the then current term.
Mr. Nash is employed under a standard contract for employment of directors
in the United Kingdom which provides, among other things, certain statutory
entitlements and a base salary of (pound)38,250 which is reviewed annually. The
agreement does not have a fixed term and, except in the case of serious employee
misconduct or gross negligence, requires the parties to the agreement to provide
12 months prior written notice of a desire to terminate. The Company may make a
payment in lieu of notice.
Compensation Committee Interlocks and Insider Participation
From October 1992 until June 1993, the executive compensation program of
the Company was administered by the Board of Directors. During such period Mr.
Faulkner, President, and Mr. Minkel, Executive Vice President, participated in
the deliberations of the Board of Directors concerning executive officer
compensation. On June 3, 1993, the Board of Directors established a Compensation
Committee to administer the Company's executive compensation program. The
Compensation Committee is currently comprised of four non-employee directors.
Stock Options
The Company has adopted the Amended and Restated Nimbus CD International,
Inc. 1995 Stock Option and Stock Award Plan (the "Nimbus Plan"). The Nimbus Plan
is intended to further the long-term stability and financial success of the
Company by attracting and retaining key employees through the use of stock
incentives, including stock options. The Company does not award stock
appreciation rights under the Nimbus Plan. The Company has reserved a total of
2,715,449 shares (adjusted to give effect to the Company's 3.76049 stock split
effective October 16, 1995) of common stock for issuance under the Nimbus Plan.
The following table sets forth additional information concerning
individual grants of stock options made under the Nimbus Plan during the last
completed fiscal year to each of the Named Executive Officers:
Option Grants In Last Fiscal Year
POTENTIAL
REALIZED VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION
FOR OPTION TERM (1)
- - ------------------------------------------------------------ ---------------
% OF
TOTAL
OPTIONS
GRANTED
TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION 5% 10%
NAME (#)(2) YEAR ($/SH) DATE ($) (%)
- - ------------------------------------------------------------ ---------------
Lyndon J. Faulkner 15,000 7.3% $11.25 5/31/05 $23,700 $60,300
20,000 9.7% $16.50 3/31/06 $31,600 $80,400
L. Steven Minkel 12,000 5.8% $11.25 5/31/05 $18,960 $48,240
20,000 9.7% $16.50 3/31/06 $31,600 $80,400
David J. Trudel 20,000 9.7% $16.50 3/31/06 $31,600 $80,400
Robert J. Headrick 5,000 2.4% $16.50 3/31/06 $7,900 $20,100
Howard G. Nash 20,000 9.7% $16.50 3/31/06 $31,600 $80,400
(1) The potential realized values in the table assume that the market price of
the Company's Common Stock appreciates in value from the date of grant to
the end of the option term at the annualized rates of five percent and ten
percent, respectively. The actual value, if any, an executive may realize
will depend on the excess, if any, of the stock price over the exercise
price on the date the option is exercised. There is no assurance that the
value realized by an executive will be at or near the value estimated in
the table.
(2) Options granted to Messrs. Faulkner and Minkel were granted as of May 20,
1996 and on June 5, 1996. Options granted to Messrs. Trudel, Headrick and
Nash were granted June 5, 1996. Options granted as of May 20, 1996 will
vest ratably over a five year period with one fifth of the options
becoming exercisable on May 31, 1996, and one fifth vesting each May 31
thereafter until the options are fully vested on May 31, 2000. The options
granted on June 5, 1996 will vest ratably over a five year period with one
fifth of the options becoming exercisable on March 31, 1997 and one fifth
vesting each March 31 thereafter until the options are fully vested on
March 31, 2001.
The following table sets forth information concerning each exercise of
stock options during fiscal 1997 by each of the Named Executive Officers and the
fiscal year-end value of unexercised options, provided on an aggregated basis:
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Unexercised Option Values
(A) (B) (C) (D) (E)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY(2)
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)
SHARES
ACQUIRED VALUE(1) EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
(#) ($)
- - --------------------------------------------------------------------------------
Lyndon J. Faulkner 0 $0.00 410,101/337,572 $3,392,290/$2,259,896
L. Steven Minkel 0 $0.00 108,171/262,576 $718,452/$1,506,233
David J. Trudel 0 $0.00 4,000/16,000 $0/$0
Robert J. Headrick 0 $0.00 37,616/76,540 $271,671/$502,442
Howard G. Nash 0 $0.00 87,457/209,047 $687,082/$627,506
(1) The dollar values referred to in columns (C) and (E) are calculated by
determining the difference between the fair market value of the securities
underlying the options and the exercise price of the options at exercise
or fiscal year-end, respectively.
(2) Options are in-the-money if the fair market value of the underlying
securities exceeds the exercise price of the option.
Certain Relationships and Related Transactions
1995 Recapitalization. On March 31, 1995, certain affiliates of McCown De
Leeuw & Co. ("MDC") and Behrman Capital L.P. ("Behrman") replaced affiliates of
DLJ Merchant Banking, Inc. ("DLJMB") as the Company's majority stockholders
through a series of transactions (the "Recapitalization"). The MDC Entities and
Behrman Capital acquired 10,698,970 shares of the Company's Common Stock for an
aggregate purchase price of $27 million and another investor acquired 118,876
shares of Common Stock for $300,000. The Company refinanced its then-outstanding
debt and borrowed an additional $41.1 million. The Company also received $1.7
million from Chase Manhattan Investment Holdings, Inc. ("Chase Manhattan") for
the issuance of warrants to purchase 693,453 shares of its Common Stock for
$0.01 per share. The warrants became exercisable upon the occurrence of the
Company's initial public offering and Chase Manhattan exercised its right to
purchase 175,000 shares of Common Stock. The remainder of the warrants expire on
March 31, 2005.
The proceeds from the issuance of Common Stock, warrants and additional
debt were used by the Company to acquire 22,333,768 shares of its Common Stock
held by the DLJMB Investors and 2,834,436 shares of Common Stock from certain
members of management and other stockholders (including 2,174,015 shares
received by management upon exercise of stock options which became fully vested
in the Recapitalization) for an aggregate cost of $65.3 million, including
related fees and expenses.
Initial Public Offering. On October 16, 1995, the Company declared a
3.76049 for one stock split which was distributed to stockholders on October 18,
1995. Thereafter, on October 30, 1995, the Company completed an initial public
offering of securities with the sale of 6,350,000 shares of Common Stock at a
price per share (net of underwriting discounts and commissions) of $6.55. Of the
6,350,000 shares of Common Stock offered for sale, 5,080,000 shares were
purchased and offered for sale to the public by underwriters in the United
States (the "U.S. Offering"), with the remaining 1,270,000 shares being
purchased and offered for sale to the public by foreign underwriters (the
"International Offering", together with the U.S. Offering, the "Offerings").
Contemporaneously with the Offerings, Behrman Capital, a principal stockholder
of the Company, purchased 500,000 shares of Common Stock of the Company at $6.55
per share in a private placement transaction.
Stockholders Agreement. On March 31, 1995, the Company and holders of
Common Stock (collectively, the "Holders") entered into a Stockholders Agreement
(the "Stockholders Agreement"). The Stockholders Agreement contains, among other
things, restrictions on the transfer of shares of Common Stock and certain
registration rights with respect thereto and matters related to the Board of
Directors of the Company. Upon completion of the Offerings, all of the
provisions of the Stockholders Agreement terminated except for provisions
relating to certain registration rights. These provisions state that after March
31, 2000, Behrman Capital and the DLJMB Investors, and after March 31, 2002,
Chase Manhattan, shall each have a one time right to demand that the Company
register for sale under the Securities Act of 1933 (the "Securities Act") all or
a portion of the shares of Common Stock of such Holder as then owned by it. Any
such registration is subject to certain time and size limitations. In addition,
the Holders are also entitled to require the Company to use its best efforts to
include shares owned by them in a registered offering of equity securities of
the Company, subject to marketing restrictions determined by the managing
underwriter.
Registration Rights Agreement. Upon consummation of the Offerings, the
Company and the MDC Entities entered into a registration rights agreement
pursuant to which the Company will grant certain registration rights to the MDC
Entities and certain of their transferees and assignees with respect to shares
of Common Stock owned or acquired by the MDC Entities following the Offerings
(the "Registration Rights Agreement"). Pursuant to the Registration Rights
Agreement, the MDC Entities will have the right to require the Company to file
up to five registration statements under the Securities Act, which may be
increased by an additional three registrations if effected on Form S-3, covering
the MDC Entities' shares and the shares of Common Stock of certain transferees
and assignees of the MDC Entities. The Company has agreed to pay all costs and
expenses relating to the exercise of the MDC Entities' registration rights,
except for underwriting commissions relating to shares sold by the MDC Entities.
The Company will indemnify the MDC Entities for certain liabilities, including
liabilities under the Securities Act, in connection with any such registration.
Under the Registration Rights Agreement, the MDC Entities will have the right to
transfer their respective rights to a transferee or assignee of their shares of
the Common Stock in a transfer other than pursuant to a public offering.
By letter agreement dated October 31, 1995, the MDC Entities and Behrman
Capital agreed that upon request of Behrman Brothers, L.P., the general partner
of Behrman Capital L.P., the MDC Entities will agree to exercise one of the
demand registration rights conferred on the MDC Entities pursuant to the
Registration Rights Agreement. This agreement will enable Behrman Capital to
exercise incidental registration rights with respect to their shares of Common
Stock which were granted pursuant to the Stockholders Agreement.
Pursuant to Rule 144 promulgated under the Securities Act, the MDC
Entities and Behrman Capital may, without registration under the Securities Act,
sell, within any three-month period, a number of shares less than or equal to
the greater of 1% of the then outstanding shares of Common Stock or the average
weekly reported trading volume of the Common Stock during the four calendar
weeks preceding such sale, subject, in some cases, to the two year holding
period described in Rule 144. Shares owned by the MDC Entities and Behrman
Capital will be eligible for sale to "qualified institutional buyers" pursuant
to Rule 144A under the Securities Act without regard to the volume limitations
contained in Rule 144.
Transactions with the Investors. In connection with the Recapitalization,
the Company paid MDC Management Company III, L.P., an affiliate of the MDC
Entities, and Behrman Brothers Management Corporation, an affiliate of Behrman
Capital, transaction fees of $2,425,000 and $1,575,000, respectively, plus
reimbursement for out-of-pocket expenses incurred in connection with services
rendered in connection with the Recapitalization.
Transactions with Management Stockholders. In connection with the
Recapitalization, the Company (i) purchased 296,549 shares of Common Stock
received pursuant to the exercise of stock options from Messrs. Faulkner,
Minkel, Headrick, Nash and Lynch on March 31, 1995 for $2,814,250 and (ii)
purchased 117,628 additional shares of Common Stock from Mr. Minkel for
$296,847. The shares were reacquired at their then fair value of $2.52 per
share, the price paid by the MDC Entities, Behrman Capital and other
stockholders in the Recapitalization.
Transactions with Other Parties. The Company's United Kingdom subsidiary
employs the services of Whitehead Electrical Company, Ltd., an electrical
contracting company of which Lyndon Faulkner's brother is the Managing Director.
The services are supplied on competitive terms. The Company paid Whitehead
Electrical Company, Ltd. $129,556 during the fiscal year ended March 31, 1997.
In April 1994, the Company entered into the Donnelley CD-ROM Agreement
with R.R. Donnelley & Sons Company ("Donnelley"), whereby the Company
established a multiline compact disc manufacturing facility in Provo, Utah,
requiring capital expenditures of approximately $13 million by the Company. In
April 1995, as permitted by the Donnelley CD-ROM Agreement, Donnelley assigned
substantially all of its rights in, and obligations under, the Donnelley CD-ROM
Agreement to Stream (as assigned, the "Stream CD-ROM Agreement"). Effective
April 1, 1997, the Company entered into a new agreement with Stream which
terminated the Stream CD-ROM Agreement and increased Stream's commitment to
purchase 27.5 million discs during fiscal 1998 and 20.6 million discs for the
first nine months of fiscal 1999. The agreement will terminate December 31, 1998
and is subject to reductions based upon changes in the cost of manufacturing for
CD-ROM discs.
The Company provides CD manufacturing services to CUC International, Inc.,
a software company and its predecessor, Davidson & Associates, Inc. Robert M.
Davidson, a director of the Company, served as Vice Chairman of the Board of CUC
International, Inc. until his resignation on May 27, 1997. The services supplied
to CUC International are on competitive terms. Sales to CUC International and
Davidson & Associates were $3.4 million for fiscal 1997.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers, and persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
the Company's Common Stock and to provide copies of the reports to the Company.
Late reports were filed prior to the filing of this proxy by (i) Anthony V. Dub
with respect to the Company's award under the Directors' Plan of options to
purchase 2,500 shares of the Company's Common Stock and (ii) Howard G. Nash with
respect to the Company's award of 20,000 options to purchase shares of the
Company's Common Stock under the Nimbus Plan. Except as set forth above, to the
Company's knowledge, based solely on a review of the copies of reports furnished
to the Company, and written representations that no other reports were required
to be filed, during the fiscal year ended March 31, 1997, the Company's
directors, executive officers, and stockholders beneficially owning more than
ten percent of the Company's Common Stock complied with their respective Section
16(a) reporting requirements.
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF ACCOUNTANTS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
The Board of Directors, upon the recommendation of its Audit Committee,
has appointed Coopers & Lybrand L.L.P. ("Coopers") to serve as independent
certified public accountants of the Company and its subsidiaries for the year
ending March 31, 1998 and recommends ratification of such appointment by the
stockholders. Its representatives will be present at the Annual Meeting and will
have the opportunity to make a statement if they desire to do so and to respond
to appropriate questions asked by stockholders.
In the event the proposal to ratify the appointment of Coopers is
defeated, the adverse vote will be considered as a direction to the Board of
Directors to select other independent accountants for the next year. However,
because of the expense and difficulty in changing independent accountants after
the beginning of a year, the Board of Directors intends to allow the appointment
for fiscal 1998 to stand unless the Board of Directors finds other reasons for
making a change.
The Board of Directors considers Coopers to be well qualified to serve as
the independent accountants for the Company.
The Board of Directors recommends a vote "FOR" the proposal to ratify the
appointment of Coopers as independent accountants for fiscal 1998. Proxies
solicited by the Board of Directors will be so voted unless stockholders
otherwise specify in their proxies.
OTHER MATTERS
Management is not aware of other matters which will come before the
meeting, but if any such matters are properly presented, proxies solicited
hereby will be voted in accordance with the best judgment of the persons holding
the proxies. All shares represented by duly executed proxies will be voted at
the meeting.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any stockholder proposals to be considered by the Company for inclusion in
the proxy materials for the 1998 Annual Meeting of Stockholders must be received
by the Company no later than March 12, 1998.
For the Board of Directors,
L. Steven Minkel, Secretary
Ruckersville, Virginia
July 8, 1997
THE COMPANY WILL MAIL WITHOUT CHARGE UPON WRITTEN REQUEST A COPY OF THE 1997
ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND A
LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO SECRETARY, NIMBUS CD INTERNATIONAL,
INC., P.O. BOX 7427, CHARLOTTESVILLE, VIRGINIA, 22906.
Proxy
NIMBUS CD INTERNATIONAL, INC.
Proxy for Annual Meeting of Stockholders _ August 5, 1997 This Proxy is
Solicited on Behalf of the Board of Directors of Nimbus CD International, Inc.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated July 8, 1997, and appoints Charles
Ayres and Grant G. Behrman, or either of them, as proxies, each with the power
to appoint his substitute and to act alone, and authorizes them, or either of
them, to represent and to vote, as designated on the reverse side of this card,
all shares of Common Stock of Nimbus CD International, Inc. held of record by
the undersigned on June 5, 1997, at the Annual Meeting of Stockholders to be
held on August 5, 1997, and at any adjournment thereof.
The Board of Directors Recommends a Vote FOR Proposals 1 and 2 appearing on the
Reverse Side Hereof
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
Please mark vote in oval in the following manner using dark ink only. / /
For All
(Except
For Withhold Nominee(s)
1. Election of Directors _ All All written below)
Nominees: Charles Ayres, Darryl G. Behrman, / / / / / /
Grant G. Behrman, Robert M. Davidson, David E. DeLeeuw,
Anthony V. Dub, Lyndon J. Faulkner, George E. McCown,
Glenn S. McKenzie, L. Steven Minkel.
2. Ratification of selection of Coopers & For Against Abstain
Lybrand LLP as the Company's independent / / / / / /
accountants for fiscal year 1998.
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no directions to the contrary are indicated,
this proxy will be voted FOR Proposal 1 and FOR Proposal 2.
Dated: _________________________________, 1997
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Signature
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Signature, if held jointly
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.