SCHEDULE 14A
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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Proxy Statement Rand Capital Corporation
RAND CAPITAL CORPORATION
2200 RAND BUILDING
BUFFALO, NEW YORK 14203
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS
The 2004 Annual Meeting of Shareholders of Rand Capital Corporation
(the "Corporation") will be held on Thursday, April 29, 2004 at 10:30 a.m. in
Room 931, Rand Building, 14 Lafayette Square, Buffalo, New York, for the
following purposes:
1. To elect seven Directors to hold office until the next annual
meeting of shareholders and until their successors have been
elected and qualified.
2. 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 19, 2004 are
entitled to notice of, and to vote at the meeting, and any adjournment thereof.
April 6, 2004 By order of the Board of Directors,
Buffalo, New York 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
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Rand Capital Corporation (the
"Corporation") for the Annual Meeting of Shareholders to be held on April 29,
2004. Only shareholders of record at the close of business on March 19, 2004,
are entitled to notice of and to vote at the meeting, and at any adjournment
thereof. On that date the Corporation had outstanding shares of 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 the Corporation prior to the taking of a vote, or by voting in person at the
meeting. Proxies submitted with abstentions and broker non-votes will be counted
in determining whether or not a quorum is present. Abstentions and broker
non-votes will not be counted in tabulating the votes cast on proposals
submitted to shareholders.
This Proxy Statement and accompanying form of proxy are being mailed to
shareholders on or about April 6, 2004. A copy of the Corporation's 2003 Annual
Report, which contains financial statements, accompanies this Proxy Statement.
The cost of soliciting proxies in the accompanying form will be borne
by the Corporation. The Corporation does 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, proxies may be solicited in person or by telephone by
directors, officers and regular employees of the Corporation, who will receive
no additional compensation therefore.
The Corporation's 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 the Corporation's shares on March 19, 2004, by (a) persons known to
the Corporation to be beneficial owners of more than 5% of the outstanding
shares, (b) the directors and nominees for director of the Corporation, and (c)
all directors and officers of the Corporation 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.
Amount and Nature of
Beneficial Owner Beneficial Ownership (1) Percent of Class(4)
--------------------------------------------------------------------------------------------
(a) More than 5% Owners:
Willis S. McLeese..................................800,000(2) 13.9%
c/o 2200 Rand Building, Buffalo, NY
Reginald B. Newman II..............................651,579 11.4
350 Essjay Road, Williamsville, NY
(b) Nominees for Director
Allen F. Grum.......................................73,628 1.3
Luiz F. Kahl........................................64,516 1.1
Erland E. Kailbourne................................10,000 *
Ross B. Kenzie.....................................155,000 2.7
Willis S. McLeese..................................800,000(2) 13.9
Reginald B. Newman II..............................651,579 11.4
Jayne K. Rand......................................193,976 3.4
(c) All Directors and Officers as a group:
Eight persons....................................1,998,699(3) 34.9%
*Less than 1%
(1) The beneficial ownership information presented is based upon information
furnished by each person or contained in filings made with the Securities
and Exchange Commission.
(2) These shares are owned by Colmac Holdings, Ltd., a corporation of which Mr.
McLeese is the Chairman and principal owner.
(3) Except as indicated above, members of the group have sole voting and
investment power over these shares.
(4) Percent of Class calculated based on 5,718,934 shares outstanding at Record
Date.
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 elected at the Corporation's last annual meeting of shareholders and was
recommended for election by the Governance Committee, which is comprised of the
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 person designated as
proxies to vote, in their discretion, for such other person as may be designated
as a nominee by the Board of Directors.
DIRECTOR INDEPENDENCE
In March 2004, the Board of Directors affirmatively determined that
each of the six non-management directors, Luiz F. Kahl, Erland E. Kailbourne,
Ross B. Kenzie, Willis S. McLeese, Reginald B. Newman, II, and Jayne K. Rand is
an independent director under the rules and guidelines of the NASDAQ and the
Securities and Exchange Commission 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 the Corporation and the Directors classified as independent other than
service on its Board of Directors and compensation paid to directors.
The foregoing independence determination of the Board of Directors also
included conclusions of the Board of Directors that:
- each of the members of the Audit Committee, Governance Committee,
and Compensation Committee is independent under the standards
described above for purposes of membership on each of those
committees; and
- 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).
Mr. Newman is currently serving as the "lead" independent director for
purposes of scheduling and setting the agenda for the executive sessions of the
independence directors. It is presently contemplated that these executive
sessions will occur at least twice during the fiscal year ending December 31,
2004, in conjunction with regularly scheduled Board meetings, in addition to the
separate meetings of the standing committees of the Board of Directors.
Communications to the 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. All security
holder communications addressed in that manner will be delivered directly to Mr.
Newman.
Proxy 4
Proxy Statement Rand Capital Corporation
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 the Corporation. If a Director is unable to attend a Board meeting
in person, participation by telephone is permitted, and in that event the
Director would not attend the Annual Meeting of Stockholders.
INFORMATION REGARDING THE NOMINEES
Name and Year
Became a Director
of the Company Age Principal Occupation
----------------- --- --------------------
ALLEN F. GRUM 1996 46 He has served as the President and Chief Executive Officer of the Corporation
since January 1996. Prior to becoming President, 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 variety of Boards of Directors in which
the Corporation has an investment.
LUIZ F. KAHL 1997 66 He has been the President of The Vector Group, LLC, Williamsville, NY, a
private investment company, since February 1996. Prior thereto, he was the
President of the Carborundum Company, and Chief Executive Officer of
BP Advanced Materials, Niagara Falls, NY, subsidiaries of British
Petroleum plc, manufacturers of high technology ceramic materials since 1983.
Mr. Kahl also serves on the Board of Directors of the Greater Buffalo Savings
Bank, UB Foundation Board of Trustees, and is the Chairman of the Niagara
Frontier Transportation Authority.
ERLAND E. KAILBOURNE 1999 62 From May 2002 until March 2003, he was Chairman and Interim CEO of Adelphia
Communications. (Adelphia filed a petition under Chapter 11 of the United
States Bankruptcy Code in June 2002.) Prior thereto, he was Chairman and
President of the John R. Oishei Foundation, Chairman and Chief Executive
Officer of Fleet National Bank, New York Region and Chairman and Chief
Executive Officer of Security Norstar Bank. Mr. Kailbourne is also a
director of Albany International Corporation.
Proxy 5
Proxy Statement Rand Capital Corporation
ROSS B. KENZIE 1996 72 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. Mr. Kenzie also serves on the Board of Directors of
Biophan Technologies, Inc., a development company specializing in highly
marketable business device technologies and is a former Director of Merchants
Insurance Company.
WILLIS S. MCLEESE 1986 90 Since 1976, Mr. McLeese has been the Chairman of Colmac Holdings Limited,
Toronto, Canada, which develops, owns and operates cogeneration and
alternative energy electric power generating plants.
REGINALD B. NEWMAN II 1987 66 Mr. Newman has been Chairman of the Board since 1996. Mr. Newman is the
Chairman of NOCO Energy, Corp., Tonawanda, NY, a petroleum distributor.
Mr. Newman is also a director of M&T Bank Corporation, a financial
institution headquartered in Buffalo, NY.
JAYNE K. RAND 1989 43 Since 1993, Ms. Rand has been a Vice President of M&T Bank.
COMMITTEES AND MEETING DATA
THE FOLLOWING COMMITTEES OF THE BOARD OF DIRECTORS FOR THE YEAR 2003
CONSISTED OF:
COMPENSATION COMMITTEE GOVERNANCE COMMITTEE AUDIT COMMITTEE
---------------------- -------------------- ---------------
Luiz F. Kahl Erland E. Kailbourne Ross B. Kenzie
Willis S. McLeese Ross B. Kenzie Luiz F. Kahl
Jayne K. Rand Jayne K. Rand Erland E. Kailbourne
Jayne K. Rand
In 2003 the full Board met on four occasions, the Audit Committee met
six times and the Compensation Committee and Governance Committee each met once.
All incumbent directors attended at least 75% of the aggregate number of
meetings of the Board of Directors and of the Committees of the Board held
during 2003.
Proxy 6
Proxy Statement Rand Capital Corporation
COMPENSATION COMMITTEE
The Compensation Committee is responsible for setting the compensation
of senior executive officers, reviewing the criteria that form the basis for
management's recommendations for officer and employee compensation and reviewing
management's recommendations in this regard.
The 2003 and 2004 compensation levels of the President and Executive
Vice President were determined by the Committee and submitted to the Board of
Directors for approval.
GOVERNANCE COMMITTEE
The primary purposes of the Governance Committee include:
- developing, recommending to the Board and assessing corporate
governance policies for the Corporation;
- overseeing the evaluation of the Board;
- recommending to the Board of Directors the individuals qualified
to serve on the Corporation's Board of Directors for election by
shareholders at each annual meeting of shareholders and to fill
vacancies of the Board of Directors; and
- implementing the Board's criteria for selecting new directors.
The Governance Committee Charter can be accessed at the Corporation's
website www.randcapital.com.
NOMINATION OF DIRECTORS
The Corporation's Governance Committee as part of its Charter performs
nominating committee functions and oversees the search for qualified individuals
to serve on the Board.
The Corporation seeks directors who have the appropriate skills and
characteristics required including; business experience and personal skills in
finance, marketing, business, and other areas that are expected to contribute to
an effective board. The Corporation identifies new director candidates from
prominent business persons and professionals in the communities it serves. The
Corporation considers nominees of shareholders in the same manner as other
nominees.
Once a board vacancy is identified, the Committee will identify a
replacement candidate to the Board of Directors. The Board may appoint the new
director to fill the unexpired term of the seat. Annually, the Governance
Committee will recommend a slate of new and/or continuing candidates to the
Board of Directors. The Board will select a slate of nominees for director from
recommendations of the Governance Committee, and submit the slate of nominees to
shareholders at the Corporation's Annual Meeting for voting.
The Corporation's 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, shall not be less than three.
Proxy 7
Proxy Statement Rand Capital Corporation
The Corporation will only consider director nominees recommended by
shareholders who adhere to the following procedure:
Recommendations identifying the proposed nominee and setting out his or
her qualifications should be submitted, in writing to the Corporation
at the following address: Rand Capital Corporation, Attention: Board
Nominations, 2200 Rand Building, Buffalo, NY 14203. All nominations are
required to be received by the Corporation between 120 days and 150
days prior to the first anniversary date of the preceding years' annual
meeting. For our annual meeting in 2005, we must receive this notice
between December 1, 2004 and January 1, 2005. Only those proposals
submitted by shareholders owning more than 1% of the outstanding stock
of the Corporation will be considered. Correspondence must include the
name and address of the individual submitting the nomination, no
anonymous submissions will be considered. The nomination must also
contain a consent from the proposed nominee to serve if elected.
The Corporation did not receive any nominations from shareholders for
the 2004 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 the Corporation's directors, officers and employees.
The Code of Ethics and the Business Ethics Policy are available in the
Governance section of the Corporation'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.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors of Rand Capital
Corporation is composed of four directors, each of which are independent, as
defined by Rule 4200(a)(15) of the National Association of Securities Dealers'
(NASD) listing standards. In 2004, the Corporation's Board of Directors
designated Ross B. Kenzie as the Audit Committee financial expert (as defined by
Securities and Exchange Commission (SEC) regulations). Mr. Kenzie is an
independent member of the Corporation'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 is included as an appendix
to this 2004 proxy statement, and will be included with future proxy filings
every three fiscal years or more currently as required by SEC regulations. The
Charter can also be accessed on the Corporation's website at
www.randcapital.com. The Committee reviews the scope and results of the annual
audit, receives reports from the Corporations Independent public accountants,
and reports the 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 8
Proxy Statement Rand Capital Corporation
INDEPENDENT AUDITOR APPOINTMENT
Rand Capital Corporation's Audit Committee will appoint the independent
auditors to examine the accounts of the Corporation for the 2004 fiscal year.
The Committee approving such selection are independent (as per NASD listing
standards), and not "interested persons" of the Corporation as defined in the
1940 Act.
On September 22, 2003, Deloitte & Touche LLP ("Deloitte")
communicated to Rand Capital Corporation and Rand Capital SBIC, L.P.
(collectively "Rand" or" Registrant") that, although Deloitte would be willing
to conduct the audit of Rand's financial statements as of and for the year ended
December 31, 2003, Deloitte would not continue as Rand's auditor for periods
subsequent to December 31, 2003. Further, on October 16, 2003, Deloitte
communicated this to the Rand Board of Directors.
On December 11, 2003, the Audit Committee engaged Freed Maxick &
Battaglia, PC (Freed) as its independent auditors for the fiscal year ended
December 31, 2003, and dismissed Rand's former independent auditors, Deloitte &
Touche LLP (Deloitte), effective as of that date.
Deloitte had performed quarterly review procedures for the
Corporation for the first three calendar quarterly periods in 2003. In addition,
Deloitte performed the audit for the fiscal years ended December 31, 2002 and
2001.
The reports of Deloitte on the Registrant's financial statements for
each of the two fiscal years ended December 31, 2002 and 2001 do not contain an
adverse opinion or a disclaimer of opinion, nor were such reports qualified or
modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2002 and 2001, and the
subsequent interim period preceding the date of Deloitte's dismissal, there have
been no disagreements between the Registrant and Deloitte on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Deloitte, would have caused Deloitte to make reference to the subject matter of
the disagreements in its reports on the Registrant's financial statements.
Registrant (or someone on its behalf) did not consult with Freed in
connection with its fiscal years ended December 31, 2002 or 2001, and through
the date of this report with respect to any of the matters set forth in Item
304(a)(2)(i) or (ii) of Regulation S-K.
None of the reportable events listed in Item 304(a)(1)(v) of
Regulation S-K under the Securities Exchange Act of 1934, as amended, occurred
with respect to the Registrant's two most recent fiscal years or the subsequent
interim period through December 11, 2003 preceding the dismissal of Deloitte.
A representative of Freed Maxick & Battaglia, PC 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 9
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, PC (Freed) and Deloitte & Touche LLP
(Deloitte) 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 engagements for those fiscal
years.
Freed provided professional services for the audit of the Corporation's
annual financial statements at December 31, 2003, for a total fee of $24,500.
This amount was billed by Freed to the Corporation in 2004. No other amounts
were either billed by or paid to, Freed in 2003.
Deloitte provided professional services for the audit of the
Corporation's annual financial statements at December 31, 2002 and the quarterly
reviews of the financial statements included in the Corporation's Form 10-Q for
an aggregate fee of $45,600.
Audit Related Fees
This category consists of assurance and related services by the
independent auditor 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, 2003 and 2002, the Corporation
did not incur any audit related fees.
Tax Fees
This category consists of professional services rendered by the
independent auditor for tax compliance and tax planning. The services for the
fees disclosed under this category include tax preparation and technical advice.
Freed has been engaged to provide professional tax related services to
the Corporation for the year ended December 31, 2003. No amounts have been
billed by Freed for tax services.
During the fiscal years ended December 31, 2003 and 2002, the
Corporation was billed $13,740 and $9,142, respectively in tax fees by Deloitte.
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, 2003 and 2002, the Corporation
did not receive financial information systems design and implementation services
from Freed or Deloitte
Proxy 10
Proxy Statement Rand Capital Corporation
For fiscal years 2003 and 2002, 100% of the services described in each
of the above were pre-approved by the Audit Committee. There were no non-audit
services performed during 2003.
The Corporation'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 the
Corporation. All other non-audit services must be pre-approved by the Audit
Committee prior to engagement, as required by the Committee's Charter.
Proxy 11
Proxy Statement Rand Capital Corporation
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of Rand Capital
Corporation is composed of four directors who are independent, as defined by
Rule 4200(a)(15) of the National Association of Securities Dealers' listing
standards. The Audit Committee operates under a written charter adopted by the
Audit Committee and Board of Directors, that is reviewed annually by the Audit
Committee. A copy of the charter, as amended March 17, 2004, is included as an
appendix to the proxy statement. The Corporation's management is responsible for
its internal accounting controls and the financial reporting process. The
Corporation's independent auditors, Freed Maxick & Battaglia, PC, are
responsible for performing an independent audit of the Corporation's
consolidated financial statements in accordance with auditing standards
generally accepted in the United States and to issue a response thereon. The
Audit Committee's responsibility is to monitor and oversee these processes. In
keeping with its responsibility, the Audit Committee met six times in 2003.
The Audit Committee has reviewed and discussed the Corporation's
audited consolidated financial statements with management. In addition, the
Audit Committee has discussed with the Corporation's independent auditors 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 whether the independent auditor's provision of non-audit services to
the Corporation is compatible with Freed Maxick'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, 2003 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)
Luiz F. Kahl
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 Company
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 12
Proxy Statement Rand Capital Corporation
EXECUTIVE OFFICERS
In addition to Mr. Grum, the executive officers of the Corporation
include:
DANIEL P. PENBERTHY, 40, has served as Treasurer of the Corporation
since August 1997. Mr. Penberthy is Senior Vice President since January 2002 and
continues to serve as the Chief Financial Officer. 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.
COMPENSATION
The following table sets forth information with respect to the
compensation paid or accrued by the Corporation in the 2003 fiscal year to each
director, and to each executive officer of the Corporation with aggregate
compensation from the Corporation in excess of $60,000. The Corporation is not
part of a fund complex.
AGGREGATE PENSION OR RETIREMENT BENEFITS ACCRUED
NAME AND POSITION COMPENSATION AS PART OF COMPANY EXPENSES
----------------- ------------ --------------------------------------
Allen F. Grum, President, Director.......$169,896 $10,174(1)
Erland E. Kailbourne, Director...........$ 4,750 0
Ross B. Kenzie, Director.................$ 5,500 0
Willis S. McLeese, Director..............$ 5,250 0
Reginald B. Newman, II, Director.........$ 5,500 0
Jayne K. Rand, Director..................$ 5,750 0
Luiz F. Kahl, Director...................$ 4,500 0
Daniel P. Penberthy, Treasurer...........$100,303 $6,003(1)
(1) Included within the indicated compensation payment of Corporation
contributions to the Corporation's 401(k) Profit Sharing Plan. To date
an aggregate of $113,757 has been deferred for payment to Mr. Grum and
Mr. Penberthy. Under the plan, participants may elect to contribute up
to 20% of their compensation on a pretax basis by salary reduction. For
eligible employees, the Corporation makes a flat contribution of 1% of
compensation and matches an eligible contribution of up to a maximum of
five percent (5%). In addition, the Corporation may contribute an
annual discretionary amount as determined by the Board of Directors. In
2003, the Corporation did not make a discretionary contribution to the
401(k) Plan.
Proxy 13
Proxy Statement Rand Capital Corporation
DIRECTOR COMPENSATION
During 2003, under the Corporation's standard compensation arrangements
with directors, each non-employee director received an annual fee of $2,000 plus
$1,000 for attendance at each meeting of the Board of Directors. The Audit
Committee members received $500 for each meeting attended and the Compensation
and Governance Committee members received $350 for each meeting attended. The
Board of Directors has limited director compensation to no more than $9,000
annually.
PROFIT SHARING AND STOCK OPTION PLANS
In July 2001, the shareholders of the Corporation authorized the
establishment of an Employee Stock Option Plan (the "Plan"). The Plan provides
for an award of options to purchase up to 200,000 common shares to eligible
employees. In 2002, the Corporation placed the Plan on inactive status as it
developed a new profit sharing plan for the Corporation's employees in
connection with the establishment of its SBIC subsidiary. As of December 31,
2003, no stock options had been awarded under the Plan. Because Section 57(n) of
the 1940 Act prohibits maintenance of a profit sharing plan for the officers and
employees of a Business Development Company (BDC) where any option, warrant or
right is outstanding under an executive compensation plan, no options will be
granted under the Plan while any profit sharing plan is in effect with respect
to the Corporation.
In July 2001, the Corporation also formed a Non-Employee Director Plan.
In September 2003, the Corporation terminated the Non-Employee Director Plan and
withdrew its application to the SEC regarding its exemption application for the
Non-Employee Director Plan under the requirements of Section 57(n). No shares
had been issued under the plan.
The Corporation established a Profit Sharing Plan for its executive
officers in accordance with Section 57(n) of the Investment Company Act of 1940
(the "1940 Act"). There were no contributions to the profit sharing plan for
2003 and 2002. The Plan provides for an annual accrual amount based on the net
realized capital gains and unrealized depreciation of Rand Capital SBIC, L.P.
for the period. Participants in the Plan vest in the annual accrual amounts over
a four year period, beginning February 1, 2002 (commencement date). As long as
the Profit Sharing Plan is in effect, no options will be issued under the Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and persons who own more than
ten percent of the Corporation'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 the
Corporation with all Section 16(a) reports they file.
To the Corporation's knowledge, based solely on review of the copies of
such reports furnished to the Corporation 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, 2003.
Proxy 14
Proxy Statement Rand Capital Corporation
DIRECTORS' AND OFFICER'S LIABILITY INSURANCE
The Corporation has an insurance policy from American International
Specialty Lines Insurance Company that indemnifies (1) the Corporation for any
obligation incurred as a result of the Corporation's indemnification of its
directors and officers under the provisions of the New York Business Corporation
Law and the Corporation's Bylaws, and (2) the Corporation's directors and
officers as permitted under the New York State Business Corporation Law and the
Corporation's Bylaws. The policy covers all directors and officers of the
Corporation for 12 months ending December 2004 for a total premium of
$46,061.60. No sums have been paid to the Corporation or its officers under the
insurance contract.
LITIGATION
No material pending legal proceedings as defined in Item 103 of
Regulation S-K have been identified by the Corporation.
2. OTHER BUSINESS
The Corporation does not know of any other matters to come before the
meeting. However, 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 2005 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2005 Annual
Meeting of Shareholders must be received at the Corporation's offices not later
than December 6, 2004, to be considered for inclusion in the Corporation's proxy
statement and form of proxy for that meeting.
By Order of the Board of Directors
Reginald B. Newman II
Chairman of the Board
April 6, 2004
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 15
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 16
Proxy Statement Rand Capital Corporation
FINANCIAL STATEMENTS AVAILABLE
A copy of the Corporation's 2003 Annual Report containing audited
financial statements accompanies this Proxy Statement. Such consolidated
financial statements are hereby incorporated herein by reference.
THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO EACH STOCKHOLDER UPON
WRITTEN REQUEST A COPY (WITHOUT EXHIBITS, UNLESS OTHERWISE REQUESTED) OF THE
CORPORATION'S ANNUAL REPORT ON FORM 10-K REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ("SEC") FOR THE YEAR ENDED DECEMBER 31, 2003.
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 ON THE INTERNET.
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 17
Appendix to Proxy Statement Rand Capital Corporation
AUDIT COMMITTEE CHARTER
(v 3.17.04)
PURPOSE
The Audit Committee (the "Committee") is part of the Board of Directors
(the "Board") of Rand Capital Corporation (the "Corporation"). The Committee's
primary function is to assist the Board in fulfilling its oversight
responsibility with respect to the quality and integrity of Corporation's
published financial information, internal controls, audit processes and other
matters as deemed necessary by the Committee or directed by the Board. The
Committee serves as a communication channel between independent auditors,
financial management and the Board on such matters.
AUTHORITY
In discharging its oversight role, the Committee is empowered to investigate any
matter relating to the Corporation's accounting, auditing, internal control or
financial reporting practices brought to its attention with full access to the
Corporation's books, records, facilities and personnel. The Committee may retain
outside counsel, auditors or advisors in achieving such purpose, whose funding
will be determined by the Audit Committee, and provided for by the Corporation.
MEMBERSHIP
The number of members of the Committee shall be determined and appointed by the
Board with a minimum number and independence requirements to maintain membership
on the Committee which meets or exceeds the Regulations.
NASDAQ Marketplace Rule 4350 (d) provides that members should be financially
literate, and at least one member with financial expertise as defined in the
regulations. The Committee must consist of a minimum of three directors, all of
whom are independent, as defined in Marketplace Rule 4200 (15).
One member of the Committee shall be appointed as Chair and will maintain
communication between the President, CFO and the Corporation's audit partner.
Compensation for the Committee is established by the Board as permitted by
Regulations. An Audit Committee member may not receive any compensation from the
Corporation except for Board or Committee service.
MEETINGS
The Committee shall meet formally at least three times per year, or more
frequently as the Committee considers necessary. In addition or combined with
the aforementioned meetings, the Committee or its Chair, will communicate with
the independent auditors regarding quarterly/interim financial information.
Appendix to Proxy Statement Rand Capital Corporation
The Committee shall meet separately and periodically with management and the
independent auditors in Executive Session. The Committee shall report to the
Board on the proceedings of each Committee meeting and make recommendations to
the Board when appropriate.
OVERSIGHT AREAS
Although the Committee may wish to consider additional duties from time to time,
the general recurring responsibilities of the Committee in carrying out its
oversight role are described below:
- Oversee the relationships with the independent auditors, the audit
process/plan, receive and review audit reports, allow full access to the
Committee by auditors. Discuss the independent auditor performance and
effectiveness. The Committee must pre-approve all non-audit and audit
services provided by the audit firm. The independent auditor shall report
directly to the Audit Committee.
- Discuss with management and independent auditor's financial information and
earnings report contained in annual reports and other shareholder filings,
prior to their release if practicable. The review of interim/quarterly
financial data may be discussed with the independent auditors and the
Committee or its Chairman, as necessary, in conjunction with the Board's
review of the financial information.
- Obtain an annual written confirmation from independent auditors consistent
with Independence Standards Requirements regarding their independence. The
Committee shall discuss the contents of the confirmation with the auditors
and take necessary action with respect to relationships identified, which
could impair such independence.
- Review audited financial statements and discuss with management and
independent auditors. Such discussions shall include matters required by
Statement of Auditing Standards, SAS 61 and updated amendments. Following
such review, the Committee shall make a recommendation to the Board
regarding the inclusion of such audit report in the Corporation's Annual
Report filed with the SEC.
- Discuss with management and/or legal counsel any legal matters, including
pending litigation and/or inquiries from regulatory or governmental
agencies that may have material impact on the Corporation's financial
statement.
- Review at least annually, the Charter of the Committee and the Committee's
effectiveness.
- Include in the proxy statement required reports from the Committee for
submission to shareholders, as required by current NASDAQ regulations.
These may include the Committee's Charter and Committee Report.
- Review and recommend to the Board of Directors that the Audited Financial
Statements be included in the Corporation's annual report on Form 10-K.
Appendix to Proxy Statement Rand Capital Corporation
- Discuss with management and the independent auditors the quality and
adequacy of compliance with the Corporation's internal control and effect
of significant changes in accounting policy and procedures.
- The independent auditors' ultimate accountability shall be to the Board and
the Audit Committee, as representatives of the shareholders. The Committee
has authority for auditor compensation, appointment, retention and
oversight. As provided by the regulations, the Committee shall nominate the
independent auditors to be proposed for shareholder approval in the proxy
statement or appoint the auditors.
- Review and approve all significant conflicts of interest and related-party
transactions, and make inquiries regarding compliance with established
codes of conduct of directors and officers and employees.
- Review and discuss with Management and independent auditors the
Corporation's critical accounting policies and practices; alternative
treatments and/or disclosures of financial information within Generally
Accepted Accounting Principles that may have been considered by Management,
or that the Auditors recommend; and audit problems or difficulties
identified, including written communications to Management, and their
response.
- Establish procedures for the receipt, retention and treatment of complaints
received by the Corporation regarding accounting, internal controls, and
auditing matters, including procedures for the confidential anonymous
submission by employees of the Corporation.
- The Committee will be empowered with all Sarbanes-Oxley (SOX) specified
authority.
The Committee's job is one of oversight. Management is responsible for the
preparation of the Corporation's financial statements and the independent
auditors are responsible for auditing those financial statements. The Committee
is not responsible to plan, direct or conduct audits, nor for resolving
disagreements between management and the independent auditors. The Committee and
the Board recognize that management and the independent auditors have more
resources, time, more detailed knowledge, and information regarding the
Corporation's accounting, auditing, internal control and financial reporting
practices than the Committee does, accordingly the Committee is not responsible
to determine whether the Corporation's financial statements are complete and
accurate in accordance with generally accepted accounting principles, nor is it
the Committee's responsibility to ensure compliance with laws and regulations.
RAND CAPITAL CORPORATION
2200 Rand Building
Buffalo, New York 14203
2004 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 29, 2004 or any adjournment
hereof.
1. ELECTION OF DIRECTORS:
Election of A.F. Grum; L.F. Kahl; E.E. Kailbourne; R.B. Kenzie; W.S.
McLeese; R.B. Newman II; and J.K. Rand
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) for all nominees
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.
Dated: , 2004
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Signature
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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.