UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
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o Preliminary
Proxy Statement
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o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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þ Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to §240.14a-12
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Rand Capital Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which
transaction applies:
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Aggregate number of securities to which
transaction applies:
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Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Proxy Statement Rand Capital Corporation
TABLE OF CONTENTS
Rand Capital Corporation
2200 Rand Building
Buffalo, New York 14203
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO OUR SHAREHOLDERS
The 2007 Annual Meeting of Shareholders of Rand Capital Corporation will be held on Thursday,
April 26, 2007 at 10:30 a.m. in Room 931, Rand Building, 14 Lafayette Square, Buffalo, New York,
for the following purposes:
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To elect seven Directors to hold office until the next annual meeting of
shareholders and until their successors have been elected and qualified. |
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To consider and act upon such other business as may properly come
before the meeting. |
Shareholders of record at the close of business on March 16, 2007 are entitled to notice of,
and to vote at the meeting, and any adjournment thereof.
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April 3, 2007
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By order of the Board of Directors, |
Buffalo, New York
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Reginald B. Newman II Chairman |
Proxy 1
Proxy Statement Rand Capital Corporation
Rand Capital Corporation
2200 Rand Building
Buffalo, New York 14203
Proxy Statement
GENERAL INFORMATION
We are furnishing this Proxy Statement in connection with the solicitation of proxies by the
Board of Directors of Rand Capital Corporation for the Annual Meeting of Shareholders to be held on
April 26, 2007. Only shareholders of record at the close of business on March 16, 2007, are
entitled to notice of and to vote at the meeting, and at any adjournment thereof. On that date
Rand had outstanding 5,718,934 Common Shares, par value $.10 per share (“shares”).
Each share entitles the holder to one vote. Shares cannot be voted at the meeting unless the
shareholder is present or represented by proxy. If the enclosed form of proxy is returned properly
executed, the shares represented thereby will be voted at the meeting in accordance with the
instructions contained in the proxy, unless the proxy is revoked prior to its exercise. Any
shareholder may revoke a proxy by executing a subsequently dated proxy or a notice of revocation,
provided that the subsequent proxy or notice is delivered to us prior to the taking of a vote, or
by voting in person at the meeting.
Under the New York Business Corporation Law (the “BCL”) and our by-laws, the presence, in
person or by proxy, of the holders of a majority of the outstanding stock is necessary to
constitute a quorum of the shareholders to take action at the annual meeting. The shares that are
present at the meeting or represented by a proxy will be counted for quorum purposes. Proxies
submitted with abstentions and broker non-votes will be counted in determining whether or not a
quorum is present. Under the BCL and our by-laws, once a quorum is established, Directors standing
for election may be elected by a plurality of the votes cast.
This Proxy Statement and accompanying form of proxy are being mailed to shareholders on or
about April 3, 2007. A copy of Rand’s 2006 Annual Report, which contains financial statements,
accompanies this Proxy Statement.
We will bear the cost of soliciting proxies in the accompanying form. We do not expect to pay
any compensation for the solicitation of proxies, but may pay brokers, nominees, fiduciaries and
other custodians their reasonable fees and expenses for sending proxy materials to beneficial
owners and obtaining their instructions. In addition to solicitation by mail, our Directors,
officers and employees may solicit proxies in person or by telephone, and they will receive no
additional compensation therefore.
Our office is located at 2200 Rand Building, Buffalo, New York 14203; telephone number
716-853-0802.
Proxy 2
Proxy Statement Rand Capital Corporation
BENEFICIAL OWNERSHIP OF SHARES
Unless otherwise indicated, the following table sets forth beneficial ownership of our common
shares on March 16, 2007, by (a) persons known by us to be beneficial owners of more than 5% of the
outstanding shares, (b) the Directors, nominees for Director, and all the executive officers of
Rand, (c) all Directors and executive officers as a group. Unless otherwise stated, each person
named in the table has sole voting and investment power with respect to the shares indicated as
beneficially owned by that person.
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Amount and Nature of |
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Beneficial Ownership (1) |
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of Class (4) |
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(a) More than 5% Owners: |
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Willis S. McLeese |
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800,000 |
(2) |
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13.9 |
% |
c/o 2200 Rand Building, Buffalo, NY |
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Brown Advisory Holdings Inc. (BAHI) |
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778,226 |
(5) |
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13.6 |
% |
901 South Bond Street, Baltimore, MD |
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Reginald B. Newman, II |
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450,579 |
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7.8 |
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350 Essjay Road, Williamsville, NY |
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(b) Directors, nominees for director
and executive officers: |
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Allen F. Grum |
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73,128 |
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1.3 |
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Erland E. Kailbourne |
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10,000 |
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Ross B. Kenzie |
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100,000 |
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1.7 |
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Willis S. McLeese |
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800,000 |
(2) |
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13.9 |
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Reginald B. Newman II |
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450,579 |
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7.8 |
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Jayne K. Rand |
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149,016 |
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2.6 |
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Robert M. Zak |
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20,000 |
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Daniel P. Penberthy |
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50,000 |
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(c) All Directors and executive officers as
a group |
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1,652,723 |
(3) |
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28.9 |
% |
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Less than 1% |
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The beneficial ownership information presented is based upon information furnished by
each person or contained in filings made with the Securities and Exchange Commission. |
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These shares are owned by Colmac Holdings, Ltd., a corporation of which Mr. McLeese
is the Chairman and principal owner. |
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Except as indicated above, members of the group have sole voting and investment
power over these shares. |
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Percent of Class calculated based on 5,718,934 common shares outstanding at Record Date.
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Shares are owned by clients of Brown Advisory Services, LLC, a broker-dealer and
investment advisory subsidiary of BAHI. BAHI has shared dispositive power but no voting
power with respect to the shares. |
Proxy 3
Proxy Statement Rand Capital Corporation
1. ELECTION OF DIRECTORS
Seven Directors are to be elected at the meeting, each to serve until the next annual meeting
of shareholders and until his or her successor has been elected and qualified. Unless marked to
the contrary, the proxies received will be voted FOR the election of the seven nominees below.
Each of the nominees is presently a member of the Board of Directors and was recommended for
election by the Governance and Nominating Committee, which is comprised of non-management,
independent Directors. Each of the nominees has consented to serve as a Director, if elected. If
at the time of the meeting any nominee should be unable to serve, it is the intention of the
persons designated as proxies to vote, in their discretion, for such other person as may be
designated as a nominee by the Board of Directors. Each of the nominees was elected at Rand’s last
Annual Meeting of Shareholders.
Director Independence
The Board of Directors affirmatively determined that four of the six non-management Directors,
Erland E. Kailbourne, Ross B. Kenzie, Jayne K. Rand and Robert M. Zak are “Independent Directors”
under the rules of the SEC and under the rules and guidelines of the National Association of
Security Dealers (NASD) for NASDAQ listed companies and, therefore, that a majority of a
corporation’s seven-person Board of Directors is currently independent as so defined. The Board of
Directors has determined that there are no relationships between Rand and the Directors classified
as independent other than service on its Board of Directors and compensation paid to Directors.
Three of the Directors are deemed to be “Interested Persons” under Section 2(a)(19) of the
Investment Company Act of 1940 with respect to Rand: Allen F. Grum because he is an executive
officer of Rand, and Willis S. McLeese and Reginald B. Newman, II, because each of them
beneficially owns more than 5% of Rand’s outstanding common shares. Persons who are Interested
Persons are not independent directors under the rules and guidelines of the NASD.
The independence determination of the Board of Directors under the SEC rules and under the
NASD rules and guidelines also included conclusions of the Board of Directors that:
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each of the members of the Audit Committee and of the Governance and Nominating
Committee, and a majority of the members of the Compensation Committee are independent
under the standards described above for purposes of membership on each of those
committees; |
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the 2007 compensation of the senior executive officers was determined by a majority
of the independent Directors of the Board; and |
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each of the members of the Audit Committee also meets the additional independence
requirements under SEC Rule 10A-3(b) and NASDAQ Rule 4350(d). |
Proxy 4
Proxy Statement Rand Capital Corporation
Mr. Kailbourne is currently serving as the “lead” independent Director for purposes of
scheduling and setting the agenda for the executive sessions of the independent Directors. It is
presently contemplated that these executive sessions will occur at least twice during the fiscal
year ending December 31, 2007, in conjunction with regularly scheduled Board meetings, in addition
to the separate meetings of the standing committees of the Board of Directors.
Shareholder Communications
Communications to an individual Director, to non-management Directors as a group, or to the
entire Board, should be addressed as follows: Reginald B. Newman, II, Security Holder Board
Communications, 2200 Rand Building, Buffalo, New York, 14203, with an indication of the individual
or subgroup (if any) to whose attention the communication is directed. All security holder
communications addressed in that manner will be delivered directly to Mr. Newman, who will receive
communications for the Board and non-management Directors, and who will deliver the communication
unopened to any individual indicated Director.
Meeting Attendance
Last year all Directors attended the Annual Meeting of Stockholders, and they are expected to
do so this year. A meeting of the Board of Directors will take place on the same day and at the
same place as the Annual Meeting of Stockholders, and Directors are expected to attend all Board
and Committee meetings of Rand and the annual meeting of shareholders, but such attendance is not
required.
Information Regarding Directors, Nominees for Director, and Officers
The following table provides information concerning all persons who are Directors, nominees
for director, or officers of Rand. Rand is not part of a fund complex.
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Other |
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Principal Occupation During |
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Last Five Years |
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Directors who are
Interested
Persons (2) |
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Willis S. McLeese
(93)
c/o 2200 Rand Building
Buffalo, NY 14203
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Director
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1986
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Chairman of Colmac
Holdings Limited, Toronto,
Canada, which develops,
owns and operates
cogeneration and
alternative energy
electric power generating
plants.
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None |
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Reginald B. Newman II
(69)
350 Essjay Road
Suite 304
Williamsville, NY 14221
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Director and
Chairman of Board
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1987
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Mr. Newman is the Chairman
of NOCO Energy, Corp.,
Tonawanda, NY, a petroleum
distributor.
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Director of M&T
Bank Corporation
and Taylor Devices. |
Proxy 5
Proxy Statement Rand Capital Corporation
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Other |
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held with |
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Principal Occupation During |
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(1) |
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Last Five Years |
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Allen F. Grum
(49)
c/o 2200 Rand Building
Buffalo NY 14203
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President of Rand
and a Director
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1996
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President and Chief
Executive Officer. Prior
thereto, Mr. Grum served
as Senior Vice President
of the Corporation
commencing in June 1995.
From 1994 to 1995, Mr.
Grum was Executive Vice
President of Hamilton
Financial Corporation and
from 1991-1994 he served
as Senior Vice President
of Marine Midland Mortgage
Corporation. Mr. Grum
serves on a number of
Boards of Directors of
companies in which the
Corporation has an
investment.
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None |
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Directors who are not
Interested Persons |
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Erland E. Kailbourne
(65)
220 Liberty Street
P.O. Box 227
Warsaw, NY 14569
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Director
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1999
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Chairman of Financial
Institutions, Inc. and its
subsidiary Five Star Bank
since January 2006. From
May 2002 until March 2003,
Mr. Kailbourne was
Chairman and Interim CEO
of Adelphia
Communications. (Adelphia
filed a petition under
Chapter 11 of the United
States Bankruptcy Code in
June 2002.) He retired as
Chairman and Chief
Executive Officer (New
York Region) of Fleet
National Bank, a banking
subsidiary of Fleet
Financial Group, Inc., in
1998. He was Chairman and
Chief Executive Officer of
Fleet Bank, also a
subsidiary of Fleet
Financial Group, Inc.,
from 1993 until its merger
into Fleet National Bank
in 1997. He is a Director
of the New York ISO, The
John R. Oishei Foundation,
Albany International
Corporation, Allegany
Co-op Insurance Company
and USA Niagara
Development Corp.
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Chairman of
Financial
Institutions, Inc.
and its subsidiary
Five Star Bank, and
Albany
International |
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Ross B. Kenzie
(75)
369 Franklin Street
Buffalo, NY 14202
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Director
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1996
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Mr. Kenzie has been
retired since 1989. Prior
thereto, he was the
Chairman of the Board and
Chief Executive Officer of
Goldome Bank, Buffalo, NY,
a savings bank, since
1980. Prior thereto, Mr.
Kenzie was Executive Vice
President and Director of
Merrill Lynch Pierce
Fenner & Smith as well as
Merrill Lynch & Co.
Through 2006, Mr. Kenzie
also served on the Board
of Directors of Biophan
Technologies, Inc. and
Natural Nano, Inc.,
development companies
specializing in highly
marketable business
devices and naturally
occurring nanotube
technologies; and is a
former Director of
Merchants Mutual Insurance
Company. |
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Proxy 6
Proxy Statement Rand Capital Corporation
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of |
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Other |
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held with |
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Served |
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Principal Occupation During |
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Director- |
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Fund |
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(1) |
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Last Five Years |
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ships |
Jayne K. Rand
(46)
6 Arlington Place
Buffalo, NY 14201
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Director
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1989
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Since 1993, Miss Rand has
been a Vice President of
M&T Bank. |
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Robert M. Zak
(49)
250 Main Street
Buffalo, NY 14202
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Director
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2005
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Since 1995, Mr. Zak has
been President and Chief
Executive Officer of
Merchants Mutual Insurance
Company and of Merchants
Insurance Company of New
Hampshire, Inc., which
operate under the trade
name Merchants Insurance
Group. Mr. Zak is also
Senior Vice President and
Chief Operating Officer of
Merchants Group, Inc., the
parent company of
Merchants Insurance
Company of New Hampshire,
Inc. Mr. Zak joined
Merchants in 1985. Prior
to that, his career was in
public accounting. |
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Non-Director
Officers |
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Daniel P. Penberthy
(44)
c/o 2200 Rand Building
Buffalo, NY 14203
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Executive Vice
President and
Treasurer of Rand
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N/A
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Mr. Penberthy has served
as Treasurer of the
Corporation since August
1997. Since January 2002,
Mr. Penberthy has served
as Senior Vice President,
and he has continued to
serve as the Chief
Financial Officer since
1997. From 1993 to 1997,
Mr. Penberthy served as
Chief Financial Officer
for both the Greater
Buffalo Partnership
(formerly the Chamber of
Commerce) and the Greater
Buffalo Convention and
Visitors Bureau. Prior
thereto, from 1990 to
1993, Mr. Penberthy served
as a Senior Associate with
the Greater Buffalo
Development Foundation, a
regional business
development organization.
Prior to 1990, Mr.
Penberthy was employed by
KPMG, a public accounting
firm. |
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Indicates initial year in which person became director. All Directors’ terms of office
will be through the next annual meeting of shareholders and until their successors have been elected
and qualified. |
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Willis S. McLeese and Reginald B. Newman, II, each beneficially own more than 5% of Rand’s
outstanding securities, and Mr. Allen F. Grum is an officer of Rand, and are deemed to be
“Interested Persons” under Section 2(a)(19) of the Investment Company Act of 1940. |
Proxy 7
Proxy Statement Rand Capital Corporation
Approximate Value of Investments in Rand
The following table indicates the range of value of the common shares of Rand beneficially
owned by each Director and nominee for Director of Rand. Rand is not part of a family of
investment companies.
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Dollar Range of Equity |
| Name of Director or Nominee |
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Securities in the Fund |
(a) Directors who are not
Interested Persons: |
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Erland E. Kailbourne |
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$10,001 - $50,000 |
Ross B. Kenzie |
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Over $100,000 |
Jayne K. Rand |
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Over $100,000 |
Robert M. Zak |
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$50,001 - $100,000 |
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(b) Directors who are Interested Persons: |
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Allen F. Grum |
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Over $100,000 |
Willis S. McLeese |
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Over $100,000 |
Reginald B. Newman, II |
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Over $100,000 |
COMMITTEES AND MEETING DATA
The Committees of the Board of Directors have the following members:
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Governance and |
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Nominating Committee |
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Audit Committee |
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Ross B. Kenzie
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Erland E. Kailbourne
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Ross B. Kenzie |
Willis S. McLeese
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Jayne K. Rand
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Erland E. Kailbourne |
Robert M. Zak
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Robert M. Zak
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Jayne K. Rand |
In 2006 the full Board met on four occasions, the Audit Committee met six times, the
Governance and Nominating Committee met twice and the Compensation Committee met twice. All
incumbent Directors attended 100% of the total number of meetings of the Board of Directors and the
total number of meetings of committees of the Board that the respective Director was eligible to
attend during 2006.
Proxy 8
Proxy Statement Rand Capital Corporation
Compensation Committee
The Compensation Committee advises the independent members of the Board of Directors with
respect to the compensation of senior executive officers and reviews the criteria that form the
basis for management compensation.
The 2007 compensation levels of the President and Executive Vice President were submitted to
the independent members of the Board of Directors, representing a majority of its membership, for
approval.
The Compensation Committee has a Charter, a current copy of which can be accessed at Rand’s
website, www.randcapital.com.
Governance and Nominating Committee
The primary purposes of the Governance and Nominating Committee include:
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developing, recommending to the Board and assessing corporate governance policies for
Rand; |
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overseeing the evaluation of the Board; |
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recommending to the Board of Directors the individuals qualified to serve on Rand’s
Board of Directors for election by shareholders at each annual meeting of shareholders and
to fill vacancies on the Board of Directors. |
The Governance and Nominating Committee has a Charter, a current copy of which can be accessed
at Rand’s website, www.randcapital.com.
Nomination of Directors
Our Governance and Nominating Committee, as part of the responsibilities under its Charter,
performs nominating committee functions and oversees the identification of qualified individuals to
serve on the Board.
We seek Directors who have the required and appropriate skills and characteristics including;
business experience and personal skills in finance, marketing, business, and other areas that are
expected to contribute to an effective board. We identify new Director candidates from prominent
business persons and professionals in the communities Rand serves. We consider nominees of
shareholders in the same manner as other nominees.
Once a Board vacancy occurs, the Governance and Nominating Committee may recommend a
replacement candidate to the Board. The Board may appoint the new Director to fill the unexpired
term of the seat. Annually, the Governance and Nominating Committee will recommend a slate of new
and/or continuing candidates for the Board of Directors. The Board will select a slate of nominees
for Director from recommendations of the Governance and Nominating Committee, and submit the slate
of nominees to be voted on by shareholders at Rand’s next Annual Meeting.
Proxy 9
Proxy Statement Rand Capital Corporation
Our by-laws provide that an Annual Meeting of Shareholders shall be held on the fourth Tuesday
in April, or such other time within 30 days before or after such date as the Chairman or Board of
Directors shall determine. The number of Directors is determined by the Board of Directors, but in
no event may it be less than three.
Procedure for Shareholders to Nominate Directors
Any shareholder who intends to present a Director nomination proposal for
consideration at the 2008 Annual Meeting and intends to have that proposal included in
the proxy statement and related materials for the 2008 Annual Meeting must deliver a
written copy of the proposal to Rand no later than the deadline, and in accordance with
the procedures, specified under “Shareholder Proposals” in this proxy statement, and in
accordance with the requirements of SEC Rule 14a-8.
If a shareholder does not comply with the foregoing procedures, the shareholder
may use the procedures set forth in Rand’s by-laws, although Rand would not in the
latter case be required to include the nomination as a proposal in its proxy statement
and proxy card mailed to stockholders in connection with the next annual meeting.
The shareholder nomination proposal referred to above must set forth (1) the name
and address of the shareholder who intends to make the nomination and of the person or
persons to be nominated; (2) a representation that the shareholder is a shareholder of
record of Rand common shares entitled to vote at the meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in the
proposal; (3) a description of the arrangements or understandings between the
shareholder and each nominee or any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are being made by the
shareholder; (4) such other information regarding each nominee proposed by the
shareholder as would have been required to be included in a proxy statement filed under
the proxy rules of the SEC had each nominee been nominated or intended to be nominated
by the Board of Directors; and (5) the consent of each nominee to serve as a Director
of Corporation if elected. The Governance and Nominating Committee may refuse to
acknowledge a proposal for the nomination of any person not made in accordance with the
foregoing procedure. Recommendations for nominees should be sent to: Rand Capital
Corporation, Attention: Board Nominations, 2200 Rand Building, Buffalo, New York
14203.
Rand did not receive any nominations from shareholders for the 2007 Board of Director
elections.
Code of Business Conduct and Ethics
Rand has adopted a Code of Ethics which applies to Rand’s chief executive officer, chief
financial officer, and controller, and a Business Ethics Policy applicable to Rand’s Directors,
officers and employees. The Code of Ethics and the Business Ethics Policy are available in the
Governance section of Rand’s website located at www.randcapital.com. They are also available in
print to any shareholder who requests it. Rand will disclose any substantive amendments to or
waiver from provisions of the Code of Ethics made with respect to the chief executive officer,
chief financial officer or controller via its website.
Proxy 10
Proxy Statement Rand Capital Corporation
Audit Committee
The Board of Directors has determined that the members of the Audit Committee are independent,
as described above under “Director Independence.” The Board of Directors has determined that Ross
B. Kenzie is an Audit Committee financial expert (as defined by SEC regulations). Mr. Kenzie is an
independent member of Rand’s Board of Directors (as defined by SEC and NASD regulations).
The Audit Committee operates under a written charter adopted by the Audit Committee and Board
of Directors. The Charter can be accessed on Rand’s website at www.randcapital.com. The Audit
Committee reviews the scope and results of the annual audit, receives reports from Rand’s
independent public accountants, and reports the Audit Committee’s findings and recommendations to
the Board of Directors.
The Audit Committee has adopted necessary reporting procedures for the confidential
submission, receipt, retention and treatment of accounting and auditing complaints.
Proxy 11
Proxy Statement Rand Capital Corporation
Independent Auditor Appointment
Independent Auditors Appointment
Rand Capital Corporation’s Audit Committee has appointed Rand’s current independent auditors,
Freed Maxick & Battaglia, CPA’s, PC, (“Freed”), to examine the accounts of Rand for the 2007 fiscal
year. The Audit Committee members approving such selection are not “interested persons” of Rand as
defined in the 1940 Act. Freed audited the accounts of Rand for the 2006, 2005 and 2004 fiscal
years.
A representative of Freed is expected to be present at the Annual Meeting of Shareholders,
will have the opportunity to make a statement if desired, and will be available to respond to
appropriate questions.
Proxy 12
Proxy Statement Rand Capital Corporation
Independent Accountant Fees
The aggregate fees for each of the last two fiscal years for services rendered by Freed Maxick
& Battaglia, CPA’s, PC (“Freed”) are as follows:
Audit Fees
This category consists of fees for the audit of annual financial statements, review of
financial statements included in quarterly reports on Form 10-Q and services that are normally
provided by the independent auditor in connection with statutory and regulatory filings or audit
engagements for those fiscal years.
Freed provided professional services for the audit of Rand’s annual financial statements for
the fiscal years ended December 31, 2006 and 2005. Freed’s audit fees were $46,500 and $43,000,
respectively, for these services.
Audit Related Fees
This category consists of assurance and related services by the independent accountant that
are reasonably related to the performance of the audit and review of financial statements and are
not reported under audit fees.
For the fiscal years ended December 31, 2006 and 2005, Rand did not incur any fees for
assurance and related services.
Tax Fees
This category consists of professional services rendered by the independent accountant for tax
compliance and tax planning. The services for the fees disclosed under this category include tax
preparation and technical advice.
During the fiscal year ended December 31, 2006, Rand was billed $17,500 in tax fees and for
the fiscal year ended December 31, 2005, the Corporation was billed $16,215 by Freed.
All Other Fees
This category consists of fees not covered by Audit Fees, Audit Related Fees and Tax Fees.
For the fiscal years ended December 31, 2006 and 2005, Rand did not receive any products or
services in this category from Freed.
For fiscal years 2006 and 2005, all of the services of Freed described in the above categories
were pre-approved by the Audit Committee.
Rand’s annual audit, quarterly review and tax related fees which are estimated to be paid
during the year are submitted annually to the Audit Committee for their review and pre-approval and
then budgeted for by Rand. All other non-audit services must be pre-approved by the Audit
Committee prior to engagement, as required by the Committee’s Charter.
Proxy 13
Proxy Statement Rand Capital Corporation
Audit Committee Report
The Audit Committee has reviewed and discussed Rand’s audited consolidated financial
statements with management. In addition, the Audit Committee has discussed with Rand’s independent
auditors, Freed Maxick & Battaglia, CPA’s, PC, the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended (“Communications with Audit Committees”).
The Audit Committee has received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1, “Independence Discussions with
Audit Committees”, and has discussed with the independent auditors their independence. The Audit
Committee also has considered the independent auditors’ provision of non-audit services to Rand and
has concluded that such services are compatible with Freed’s independence.
Based on the Audit Committee’s discussions with management and the independent auditors, the
Audit Committee’s review of the representations of management, and the report of the independent
auditors, the Audit Committee recommended to the Board of Directors that the audited financial
statements be included in Rand Capital Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2006 for filing with the Securities and Exchange Commission.
This report is respectfully submitted by the Audit Committee of the Board of Directors.
Ross B. Kenzie (Chairman)
Erland E. Kailbourne
Jayne K. Rand
The information provided in the preceding Audit Committee Report will not be deemed to be
“soliciting material” or “filed” with the Securities and Exchange Commission or subject to
Regulation 14A or 14C, or to the liabilities of section 18 of the Securities Exchange Act, unless
in the future the Corporation specifically requests that the information be treated as soliciting
material or specifically incorporates it by reference into any filing under the Securities Act or
the Securities Exchange Act.
Proxy 14
Proxy Statement Rand Capital Corporation
COMPENSATION DISCUSSION AND ANALYSIS
Rand’s Chief Executive Officer, Executive Vice President, Controller and Office Manager are
salaried employees of Rand. Rand pays the salaries and other employee benefits to these employees.
Rand has a wholly owned subsidiary, Rand Capital SBIC, L.P. (“Rand SBIC”). The Chief Executive
Officer and the Executive Vice President serve as the Management Committee of the subsidiary and
they are parties to a Profit Sharing Plan of Rand SBIC that was adopted by Rand as a requirement
for the licensing of Rand SBIC.
Rand’s principal executive officers are its Chief Executive Officer, Allen F. Grum, and its
Executive Vice President/Chief Financial Officer, Daniel P. Penberthy.
The Compensation Committee, a majority of which are independent members of the Board, advises
the Board of Directors with respect to the compensation of the principal executive officers. The
Compensation Committee recommendations are then reviewed by the independent members of the Board,
who are then responsible for establishing such compensation. Rand’s CEO is responsible for the
compensation levels of its Controller and Office Manager.
Objectives of Rand’s Compensation Programs and What it is Designed to Reward
For its long-term success and enhancement of long-term stockholder value, Rand depends on the
management and analytical abilities of its executive officers, who are employees of, and are
compensated by, Rand. The Compensation Committee’s compensation objectives are to provide a
critical oversight function of compensation, appropriate levels of compensation, reward above
average corporate performance, recognize individual initiative and achievement, assist Rand in
attracting and retaining qualified management to contribute to its success, and motivate management
to enhance stockholder value.
Key Elements of Rand’s Compensation Plans and Why it is Paid:
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Base Salary – Rand sets a base salary for its executive officers at levels that are
intended to be appropriate given the scope of their duties and responsibilities. |
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Bonus – Rand pays annual bonuses to executive officers at levels that are intended
to motivate them to achieve Rand’s principal business and investment goals and to bring
their total compensation to competitive levels. |
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Profit Sharing Plan – Rand provides long term incentives to its executive officers
through its Profit Sharing Plan, which allows them to participate in the growth of its
portfolios and aligns their long term interests with those of Rand’s shareholders. The
terms of Rand’s license to maintain its Small Business Investment Company (SBIC)
subsidiary require that it maintain a Profit Sharing Plan, which provides for payment
by Rand of designated percentages of the net realized capital gains of the subsidiary. |
Proxy 15
Proxy Statement Rand Capital Corporation
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Equity – Although we believe that equity ownership by management aligns management’s
interests with increasing stockholder value, restrictions imposed by the Investment
Company Act preclude Rand from offering stock options or other equity incentives to its
executive officers at any time when it also allows them to participate in a profit
sharing plan. Rand has a stock option plan that was adopted in 2001 (see “Option
Plan,” below), but no options have been or will be granted under it while the Profit
Sharing Plan is in effect. |
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Standard Employee Benefits – Rand also provides standard employee benefits that are
considered appropriate to provide competitive employee compensation and necessary to
attract and retain talented personnel. Rand maintains a 401(k) Plan for its employees.
Under the plan, participants may elect to contribute up to 20% of their compensation
on a pretax basis, up to a maximum of $15,000 for 2006. Rand makes a flat contribution
of 1% of compensation for each participant and matches participant contributions up to
5% of compensation. Rand may also elect to contribute annual discretionary amounts
under the 401(k) Plan as determined by the Board. Rand also provides life insurance
and automobile reimbursement benefits to its executive officers. |
How the Amounts of Each Element of the Compensation are Determined and How They Fit Into Rand’s
Overall Compensation Objectives
Salary and Bonus
The Compensation Committee determined that the salary and bonuses paid to Rand employees
during the 2006 fiscal year were at levels that were in the best interests of our stockholders. In
making its determination, the Compensation Committee considered whether the salaries and bonuses
paid by Rand to its executive officers were consistent with the compensation philosophies described
above. The Compensation Committee also reviewed the performance of Rand to determine whether the
compensation paid to its executive officers is reasonable in relation to the nature and quality of
services performed. Specifically, the Committee has considered factors such as:
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total compensation in relation to Rand’s size and the composition and performance of its
investments; |
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Rand’s success in identifying appropriate investment opportunities and returns; |
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the value of Rand’s assets; and |
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the responsibilities and duties of the executive officers. |
Based on these considerations, the independent members of the Board approved the 2006 salary
levels of the executive officers in January 2006. Based on the same factors, in January 2007 the
Independent Directors approved bonuses of $50,000 payable to each of Mr. Grum and Mr. Penberthy for
their services in 2006. Rand accrued these amounts in its 2006 financial statements.
Proxy 16
Proxy Statement Rand Capital Corporation
Profit Sharing Plan
We believe Rand’s provisions for salaries and bonuses create an appropriate focus on longer
term objectives and promote executive retention, but we also believe that the Profit Sharing Plan
is an effective means of promoting long-term stockholder value and providing for executive
retention.
Rand’s long-term incentive program consists of profit sharing payments payable to the two
executive officers under its Profit Sharing Plan. Under the Profit Sharing Plan, Rand will pay its
executive officers aggregate profit sharing payments equal to12% of the net realized capital gains
of its SBIC subsidiary, net of all realized capital losses and unrealized depreciation of the
subsidiary, for the fiscal year, computed in accordance with SBA regulations.
The profit sharing payments will be split equally between Rand’s two executive officers.
Under Investment Company Act requirements, the aggregate amount of benefits which may be paid or
accrued under the Profit Sharing Plan and any other profit sharing plan maintained by Rand during
any fiscal year may not in any event exceed 20% of Rand’s net income after taxes for that fiscal
year. In accordance with Investment Company Act requirements, a majority of the members of the
Board who were not Interested Persons approved the Profit Sharing Plan on the basis that the plan
is reasonable and fair to Rand’s shareholders, does not involve overreaching of Rand or its
shareholders on the part of any person concerned, and is consistent with the interests of the
shareholders of Rand.
No payments have been made or accrued under the Profit Sharing Plan since its inception in
2002.
Conclusion
Through the compensation and incentive structure described above, a significant portion of the
amounts that may be payable as compensation has been, and will continue to be, contingent on Rand’s
performance, and realization of incentive benefits is closely linked to increases in long-term
stockholder value. Rand remains committed to this philosophy of pay for performance, recognizing
that the competitive market for talented executives and the volatility of Rand’s business may
result in highly variable compensation from year to year.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis
required by Item 402(b) of Regulation S-K with management and, based on its review and discussions
with management, the Compensation Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be in included in this proxy statement.
Submitted by the Compensation Committee
Ross B. Kenzie, Chairman
Willis S. McLeese
Robert M. Zak
Proxy 17
Proxy Statement Rand Capital Corporation
The information provided in the preceding Compensation Committee Report will not be deemed to
be “soliciting material” or “filed” with the Securities and Exchange Commission or subject to
Regulation 14A or 14C, or to the liabilities of section 18 of the Securities Exchange Act, unless
in the future the Corporation specifically requests that the information be treated as soliciting
material or specifically incorporates it by reference into any filing under the Securities Act or
the Securities Exchange Act.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee’s three members are independent directors.
Summary Compensation Table
The following table sets forth information with respect to the compensation paid or earned for
the 2006 fiscal year to each named executive officer, and to each officer of Rand with aggregate
compensation from Rand in excess of $100,000. Rand is not part of a fund complex.
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All Other |
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| Name and Principal |
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Compensation |
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| Position (1) |
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Year |
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Salary (2) |
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Bonus (2)(3) |
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(4)(5) |
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Total |
Allen F. Grum,
President & Director |
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2006 |
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$ |
155,000 |
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$ |
50,000 |
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$ |
9,521 |
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$ |
214,521 |
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Daniel P. Penberthy,
Treasurer |
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2006 |
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$ |
130,000 |
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$ |
50,000 |
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$ |
7,847 |
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$ |
187,847 |
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Mr. Grum is Rand’s principal executive officer, and Mr. Penberthy is Rand’s principal
financial officer. Neither of them has an employment contract with Rand. |
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Represent amounts earned, prior to employee 401(k) contributions, as described in footnote
(4), made by named executive. |
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Bonus was accrued by Rand at December 31, 2006 and paid in 2007.
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Included within the indicated compensation payment are contributions by Rand to its 401(k) |
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Plan. Under the 401(k) Plan, participants may elect to contribute up to 20% of their
compensation on a pretax basis by salary reduction up to a maximum of $15,000 for 2006. For
eligible employees, Rand makes a flat contribution of 1% of compensation and matches
employee contributions of up to a maximum of 5%. In addition, Rand may elect to contribute an
annual discretionary amount as determined by the Board of Directors. In 2006, Rand did not
make a discretionary contribution to the 401(k) Plan. |
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Amount indicated excludes the cost of life insurance, disability insurance and automobile
reimbursement benefits. |
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The aggregate amount of such compensation was less than $10,000 for each named executive
in 2006. |
Proxy 18
Proxy Statement Rand Capital Corporation
Option Plan
Rand does not have any outstanding equity awards, outstanding options or stock vesting rights.
In July 2001, Rand’s shareholders approved an Employee Stock Option Plan (the “Option Plan”).
The Option Plan provides for the award of options to purchase up to 200,000 common shares to
eligible employees. In 2002, Rand placed the Option Plan on inactive status as it developed its
Profit Sharing Plan in connection with the establishment of its SBIC subsidiary. As of December
31, 2006, no stock options had been awarded under the Plan.
Because Section 57(n) of the Investment Company Act prohibits maintenance of a profit sharing
plan for the officers and employees of a Business Development Company when any option, warrant or
right is outstanding under an executive compensation plan, no options will be granted under the
Option Plan while the Profit Sharing Plan is in effect.
Pension Benefits
Rand does not provide any tax-qualified defined benefit plan or supplemental executive
retirement plan, or similar plan that provides for specified retirement payments or benefits.
DIRECTOR COMPENSATION
During 2006, under Rand’s standard compensation arrangements with Directors, each non-employee
Director received an annual fee of $2,500 plus $1,000 for attendance at each meeting of the Board
of Directors. Audit Committee members received $750 for each meeting attended and Compensation
Committee and Governance and Nominating Committee members received $500 for each meeting attended.
Rand reimburses directors for reasonable out of pocket expenses incurred in attending meetings of
the Board.
The following table sets forth information with respect to the compensation paid to or earned
by each Director, excluding named executive officers, for the 2006 fiscal year. Rand did not pay
or accrue any other compensation to the following Directors for the 2006 fiscal year.
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Fees Earned or Paid in Cash |
Erland E. Kailbourne |
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$ |
12,000 |
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Ross B. Kenzie |
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$ |
12,000 |
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Willis S. McLeese |
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$ |
7,500 |
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Reginald B. Newman, II |
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$ |
6,500 |
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Jayne K. Rand |
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$ |
12,000 |
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Robert M. Zak |
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$ |
8,500 |
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Proxy 19
Proxy Statement Rand Capital Corporation
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Rand’s Directors and executive
officers, and persons who own more than ten percent of Rand’s stock, to file with the Securities
and Exchange Commission initial reports of stock ownership and reports of changes to stock
ownership. Reporting persons are required by SEC regulations to furnish Rand with all Section
16(a) reports they file.
To our knowledge, based solely on review of the copies of such reports furnished to Rand and
written representations that no other reports were required, all Section 16(a) filing requirements
applicable to its officers, Directors and greater than ten percent beneficial owners were complied
with during the fiscal year ended December 31, 2006.
Directors’ and Officer’s Liability Insurance
Rand has an insurance policy from American International Specialty Lines Insurance Company
that indemnifies (1) Rand for any obligation incurred as a result of its indemnification of its
Directors and officers under the provisions of the New York Business Corporation Law and Rand’s
by-laws, and (2) Rand’s Directors and officers as permitted under the New York State Business
Corporation Law and Rand’s by-laws. The policy covers all Directors and officers of Rand for the
12 months ending December 2006 for a total premium of $43,673.85. No sums have been paid to Rand
or its officers under the insurance contract.
2. OTHER BUSINESS
Rand does not know of any other matters to come before the meeting. If any other matters
properly come before the meeting, it is the intention of the persons designated as proxies to vote
in accordance with their best judgment on such matters.
Shareholder Proposals for the 2008 Annual Meeting
Shareholder proposals intended to be presented at the 2008 Annual Meeting of Shareholders must
be received at Rand’s offices not later than December 6, 2007, to be considered for inclusion in
Rand’s proxy statement and form of proxy for that meeting.
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April 3, 2007
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By Order of the Board of Directors
Reginald B. Newman II
Chairman of the Board |
It is important that proxies be promptly returned. Shareholders are urged to sign, date and
return the proxy in the enclosed envelope, to which no postage need be affixed if mailed in the
United States. If you attend the meeting you may, if you wish, withdraw your proxy and vote in
person.
Proxy 20
Proxy Statement Rand Capital Corporation
Multiple Copies of our Annual Report and Proxy Statement (Householding)
When more than one holder of Rand common stock shares the same address, we may deliver only
one annual report and one proxy statement to that address unless we have received contrary
instructions from one or more of those shareholders. Similarly, brokers and other intermediaries
holding shares of Rand common stock in “street name” for more than one beneficial owner with the
same address may deliver only one annual report and one proxy statement to that address if they
have received consent from the beneficial owners of the stock.
Rand will deliver promptly upon written or oral request a separate copy of the annual report
and proxy statement to any shareholder, including a beneficial owner of stock held in “street
name”, at a shared address to which a single copy of either of those documents was delivered. To
receive additional copies of our annual report and proxy statement, you may call or write Elspeth
A. Donaldson, Office Manager, Rand Capital Corporation, 2200 Rand Building, Buffalo, New York
14203, telephone (716) 853-0802 or email her at edonaldson@randcapital.com. You may also access a
copy of Rand’s annual report and proxy statement on our website, www.randcapital.com, or at the
SEC’s home page, www.sec.gov.
You may also contact Ms. Donaldson at the address or telephone number above if you are a
shareholder of record of Rand and you wish to receive a separate annual report and proxy statement
in the future, or if you are currently receiving multiple copies of our annual report and proxy
statement and want to request delivery of a single copy in the future. If your shares are held in
“street name” and you want to increase or decrease the number of copies of our annual report and
proxy statement delivered to your household in the future, you should contact the broker or other
intermediary who holds the shares on your behalf.
Proxy 21
Proxy Statement Rand Capital Corporation
FINANCIAL STATEMENTS AVAILABLE
A copy of Rand’s 2006 Annual Report containing audited financial statements accompanies this
Proxy Statement
Rand will provide without charge to each stockholder upon written request a copy (without
exhibits, unless otherwise requested) of Rand’s Annual Report on Form 10-K required to be filed
with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2006. Requests
for copies should be addressed to Investor Relations, Rand Capital Corporation, 2200 Rand Building,
Buffalo, New York, 14203. Requests may also be directed to (716) 853-0802 or to
edonaldson@randcapital.com via email. Copies may also be accessed electronically by means of the
SEC’s home page on the internet at http://www.sec.gov.
FINAL PAGE OF PROXY
Proxy 22
RAND CAPITAL CORPORATION
2200 Rand Building
Buffalo, New York 14203
2007 PROXY
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints Jayne K. Rand and Allen F. Grum as
proxies, each with the power to appoint a substitute, and hereby
authorizes them to represent and to vote as designated below all
the shares of Common Stock of Rand Capital Corporation (the
“Company”) held of record by the undersigned at the
annual meeting of shareholders to be held on April 26, 2007
or any adjournment hereof.
1. ELECTION
OF DIRECTORS:
Election
of A.F. Grum; E.E. Kailbourne; R.B. Kenzie; W.S. McLeese; R.B.
Newman II; J.K. Rand; and R.M. Zak
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o FOR
all nominees
(except as marked to the contrary below)
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o WITHHOLD
AUTHORITY
for all nominees
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INSTRUCTIONS: To withhold authority to vote for an
individual nominee, write that nominee’s name in the space
provided below.
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2. In
their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
(Continued from other side)
THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THE PROXY WILL BE VOTED FOR PROPOSAL 1.
Signature
Signature (if held jointly)
Please sign exactly as names
appears to the left. When signing as a Trustee, Executor or
Administrator, or Guardian, give title as such. All joint owners
should sign. If a corporation, please sign in full corporate
name by authorized officer, giving title. If a partnership,
please sign in partnership name by authorized persons.
Please Date, Sign and Promptly
Return in the Enclosed Envelope.