SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
Capitol Bancorp Limited
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 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.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[LOGO]
March 23, 2001
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Capitol Bancorp Limited to be held at the Lansing Center, 333 East Michigan
Avenue, Lansing, Michigan, on Thursday, May 3, 2001, at 4:00 p.m., Eastern Time.
The attached Notice of the Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting. The meeting is for the purpose
of considering and acting upon the election of directors.
During the meeting, we will also report on the operations of Capitol.
Directors and officers of Capitol will be present to respond to questions that
you may have.
Please sign, date and return the enclosed proxy card. If you attend the
Meeting, you may withdraw your proxy and vote in person, even if you have
previously mailed a proxy card.
Sincerely,
/s/ Joseph D. Reid
JOSEPH D. REID
Chairman of the Board, President
and Chief Executive Officer
CAPITOL BANCORP LIMITED
One Business & Trade Center
200 Washington Square North
Lansing, Michigan 48933
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on Thursday, May 3, 2001
The 2001 Annual Meeting of the Shareholders of Capitol Bancorp Limited will
be held at the Lansing Center, 333 East Michigan Avenue, Lansing, Michigan on
Thursday, May 3, 2001 at 4:00 p.m., Eastern Time.
A proxy card and a proxy statement for the meeting are enclosed.
The meeting is for the purpose of considering and acting upon:
1. The election of 16 directors to hold office for one year and
until their successors are elected and qualified; and
2. Such other matters as may properly come before the meeting or any
adjournments thereof.
The Board of Directors is not aware of any other business to come before
the meeting.
Action may be taken on the foregoing proposal at the meeting on the date
specified, or on any dates to which, by original or later adjournment, the
meeting may be adjourned. Shareholders of record at the close of business on
March 9, 2001, are the shareholders entitled to vote at the meeting and any
adjournments thereof.
You are asked to fill in and sign the enclosed form of proxy, which is
solicited by the Board of Directors, and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend the meeting, withdraw your
proxy and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ David O'Leary
DAVID O'LEARY
Secretary
Lansing, Michigan
March 23, 2001
IMPORTANT: THE COST OF SOLICITATION WILL BE BORNE BY THE CORPORATION. THE PROMPT
RETURN OF PROXIES WILL SAVE THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER
TO ENSURE A QUORUM. AN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
CAPITOL BANCORP LIMITED
One Business & Trade Center
200 Washington Square North
Lansing, Michigan 48933
ANNUAL MEETING OF SHAREHOLDERS
May 3, 2001
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Capitol Bancorp Limited to be used at
Capitol's 2001 Annual Meeting of Shareholders to be held at the Lansing Center,
333 East Michigan Avenue, Lansing, Michigan, on Thursday, May 3, 2001 at 4:00
p.m., Eastern Time. The accompanying notice of meeting and this proxy statement
are being mailed to shareholders on or about March 23, 2001.
REVOCATION OF PROXIES
Shareholders who execute proxies retain the right to revoke them at any
time. Unless revoked, the shares represented by such proxies will be voted at
the meeting and all adjournments thereof. Proxies may be revoked by written
notice to the Secretary or by the filing of a later proxy prior to a vote being
taken on a particular proposal at the meeting. A proxy will not be voted if a
particular shareholder attends the meeting and revokes his/her proxy by
notifying the Secretary at the meeting. Any shareholder who attends the meeting
and revokes his/her proxy may vote in person. Proxies solicited by Capitol's
Board of Directors will be voted according to the directions given therein.
Where no instructions are indicated, proxies will be voted FOR the nominees for
directors.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Shareholders of record as of the close of business on March 9, 2001 (the
record date), are entitled to one vote for each share then held. As of February
21, 2001, Capitol had 7,673,363 shares of common stock issued and outstanding.
The following table sets forth, as of February 21, 2001, certain
information as to each person (including any group as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934) who was known to be the
beneficial owner of more than 5% of Capitol's common stock as of that date, and
as to the shares of common stock beneficially owned by named executives who are
not also directors and by executive officers and directors of Capitol as a
group.
Name and Address of Shares of Percent of
Beneficial Owner Common Stock Common Stock
- ---------------- ------------ ------------
Joseph D. Reid 1,215,523(a) 15.08%
Capitol Bancorp Limited
One Business & Trade Center
200 Washington Square North
Lansing, Michigan 48933
Lee W. Hendrickson 7,098(b) <1%
Executive Vice President and Chief
Financial Officer
Cristin Reid English(e) 5,701(c) <1%
Executive Vice President
All Directors and Executive
Officers as a group (24 persons) 2,244,508(d) 27.26%
- ----------
(a) Includes 383,485 options and 1,800 warrants.
(b) Includes 2,400 options. Also includes 1,005 shares allocated and held in
Capitol's Employee Stock Ownership Plan.
(c) Includes 200 warrants and 205 shares allocated and held in Capitol's
Employee Stock Ownership Plan.
(d) Includes 16,318 warrants and 35,423 shares allocated and held in Capitol's
Employee Stock Ownership Plan, and 543,833 options.
(e) Ms. English is the daughter of Joseph D. Reid.
1
ELECTION OF DIRECTORS
Capitol's bylaws establish that the number of directors shall be not less
than five nor more than twenty-five.
The persons named in the enclosed proxy intend to vote for the election of
the nominees named in this proxy statement unless it contains instructions to
the contrary. All nominees are willing to be elected and to serve in such
capacity for one year and until their successors are elected and qualified. If
any of the nominees becomes unavailable for election, which is not anticipated,
the persons named in the proxy will vote for such other nominee, if any, as may
be proposed by the Board of Directors. A majority of the common stock voting at
the meeting is required for the election of nominees to the Board of Directors.
Each of the nominees for election to the Board of Directors is currently a
member of Capitol's Board of Directors and has been a member of Capitol's Board
of Directors since the year shown in the table below (or, as to dates prior to
1988, Capitol National Bank), except as indicated.
The table below sets forth information as of February 21, 2001 regarding
the nominees based on the data furnished by them. They have held the principal
occupations shown for at least the past five years unless otherwise indicated.
The shares in this table do not include the ESOP shares voted by Messrs. O'Leary
and Carr and by Bruce Thomas, Capitol's Executive Vice President, as committee
members representing the ESOP for which Mr. O'Leary disclaims beneficial
ownership thereof. See "Executive Compensation".
The Board of Directors recommends a vote FOR all the recommended nominees
for election as a director.
NOMINEES FOR ELECTION TO SERVE UNTIL THE ANNUAL MEETING OF SHAREHOLDERS IN 2002
Year First Shares of
Became A Common Stock Percent of
Name and Principal Positions Age Director Owned (a) Outstanding
- ---------------------------- --- -------- --------- -----------
Joseph D. Reid 58 1982 1,215,523(b) 15.08%
Chairman of the Board, President
and Chief Executive Officer of
Capitol and Sun Community
Bancorp Limited
Robert C. Carr 61 1982 62,933(c) <1%
Treasurer and Executive Vice
President of Capitol
David O'Leary 70 1982 56,330(d) <1%
Secretary of Capitol;
Chairman, O'Leary Paint Company
Louis G. Allen 71 1989 1,748(e) <1%
Retired Bank Executive
Paul R. Ballard 51 1990 87,866(f) 1.14%
Executive Vice President of
Capitol; CEO of Portage
Commerce Bank
David L. Becker 65 1990 59,436(e) <1%
President, Becker Insurance
Agency, P.C.
Douglas E. Crist 60 1982 59,059(e) <1%
President, Developers of
SW Florida, Inc.
James C. Epolito 46 1999 2,438(g) <1%
President and CEO, The
Accident Fund Company
2
Year First Shares of
Became A Common Stock Percent of
Name and Principal Positions Age Director Owned (a) Outstanding
- ---------------------------- --- -------- --------- -----------
Gary A. Falkenberg 62 1982 45,371(h) <1%
Doctor of Osteopathic Medicine
Joel I. Ferguson 62 1982 43,526(e) <1%
Chairman, Ferguson Development, LLC;
Director, Maxco, Inc.
Kathleen A. Gaskin 59 1982 35,214(i) <1%
Associate Broker/State Appraiser,
Tomie Raines, Inc. Realtors
H. Nicholas Genova 61 1992 22,260(j) <1%
Chairman and CEO, Washtenaw
News Company, Inc.; President,
H. N. Genova Development Company
L. Douglas Johns 57 1982 112,407(k) 1.46%
President, Mid-Michigan
Investment Company
Michael L. Kasten 55 1990 93,616(l) 1.22%
Managing Partner, Kasten Investments,
L.L.C.; Director and Vice Chairman,
Sun Community Bancorp Limited
Leonard Maas 79 1995 123,779(d) 1.61%
President, Gillisse Construction
Company (underground utility
construction); Partner, CP Limited
Partnership
Lyle W. Miller 57 1982 53,757(d) <1%
President, SERVCO, Inc. (provider
of credit card and computer
enhancement services)
- ----------
(a) Includes all shares as to which the nominee has voting power and/or
investment power, including shares held by entities owned and controlled,
and shares held by children residing in the same household or jointly with
spouse. This total does not reflect stock purchased through voluntary
participation in Capitol's Directors' deferred compensation plan.
(b) Includes 383,485 options and 1800 warrants.
(c) Includes 39,600 options. Also includes 13,557 shares allocated and held in
Capitol's Employee Stock Ownership Plan.
(d) Includes 1,121 options and 909 warrants.
(e) Includes 1,121 options.
(f) Includes 15,600 options. Also includes 8,224 shares allocated and held in
Capitol's Employee Stock Ownership Plan.
(g) Includes 1,121 options and 100 warrants.
(h) Includes 1,121 options and 200 warrants.
(i) Includes 1,121 options and 484 warrants.
(j) Includes 1,121 options and 300 warrants.
(k) Includes 1,121 options and 2,100 warrants.
(l) Includes 1,121 options and 1,818 warrants.
Rules and regulations promulgated by the Securities and Exchange Commission
require periodic reporting of the beneficial ownership of and transactions
involving Capitol's securities relating to directors, officers and beneficial
owners of 10% or more of Capitol's securities. Under those rules and
regulations, certain acquisitions and divestitures of Capitol's securities are
required to be disclosed via reports filed within prescribed time limits. Based
on Capitol's review of filings made during the year ended December 31, 2000,
there were nine transactions which were not reported timely pursuant to the
filing requirements.
3
As a result of the share exchange between Brighton Commerce Bank and
Capitol, effective January 31, 2000, three directors received shares of Capitol
that were not reported in the January report of holdings and should have been
reported thereon. Mr. Crist received 2,526 shares, Mr. Johns received 2,526
shares and Mr. Maas received 2,329 shares. In unrelated transactions, Mr.
Ballard sold 900 shares in September; Mr. Genova purchased 2,800 shares in three
transactions in January; and Mr. Maas purchased 1,000 shares in July, and 1,000
shares in October. These transactions were not reported on original reports of
holdings for the months in which they occurred and should have been reported
thereon.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors conducts its business through meetings of the Board
and its committees. During 2000, the Board of Directors held four meetings. All
the directors of Capitol attended at least 75% of the meetings of the Board of
Directors during this period, with the exception of Mr. Epolito who attended 50%
of the meetings and Mr. Ferguson who attended 25% of the meetings.
Directors are eligible to receive compensation for service on the board of
directors in the form of stock options. Each non-employee director has been
awarded 1,121 stock options in Capitol in 2000 as part of such compensation. The
exercise price of the options was set at the market price of Capitol's common
stock at the time of grant. The options vest after one year and expire seven
years after date of grant.
COMMITTEES OF THE BOARD OF DIRECTORS
Capitol's Board of Directors has several committees, including an executive
committee, an audit committee and a compensation committee.
EXECUTIVE COMMITTEE
The Executive Committee is composed of Messrs. Reid, O'Leary, Ferguson,
Johns, Kasten and Miller. During 2000, the Executive Committee met four times.
All committee members attended at least 75% of the meetings. The Executive
Committee meets for the purpose of monitoring current operating strategy and
implementation of Capitol's business plan.
AUDIT COMMITTEE REPORT
The Audit Committee is comprised of three directors, appointed by Capitol's
Board of Directors. The Audit Committee reviews the results of the independent
auditors' audit of Capitol's consolidated financial statements and evaluates
policies, procedures and results relating to the internal audit function and
recommends to the Board of Directors the selection of independent auditors. The
scope and purpose of the Audit Committee is described more fully in its Audit
Committee Charter which was adopted in 2000 and is attached as an Appendix to
this Proxy Statement. During 2000, the Audit Committee met four times. All
committee members attended at least 75% of the meetings.
INDEPENDENCE OF AUDIT COMMITTEE MEMBERS
Each of the members of Capitol's Audit Committee are "independent" as
defined in the applicable listing standards and related rules of the Nasdaq
Stock Market.
2000 AUDIT OF CAPITOL'S CONSOLIDATED FINANCIAL STATEMENTS
Regarding Capitol's audited consolidated financial statements as of and for
the year ended December 31, 2000, Capitol's Audit Committee has:
- reviewed and discussed the financial statements with management;
- discussed with the independent auditors the matters required to be
discussed by Statement of Auditing Standards No. 61 (as may be modified
or amended); and
- received from the auditors disclosures regarding the auditors'
independence required by Independence Standards Board Statement No. 1
(as may be modified or amended), and discussed with the auditors the
auditors' independence.
4
Based on the review and discussion above, the Audit Committee recommended
to Capitol's Board of Directors that the audited consolidated financial
statements be included in Capitol's annual report on Form 10-K for 2000 to be
filed with the Securities and Exchange Commission.
AUDIT FEES AND INDEPENDENT AUDITORS' INDEPENDENCE
The aggregate fee for audit of Capitol's consolidated financial statements
(including review of Capitol's quarterly financial statements which are part of
Form 10-Q filed with the Securities Exchange Commission and out-of-pocket
expenses relating to the audit and quarterly reviews) was $223,259 for 2000.
That amount includes fees paid by Capitol and its consolidated subsidiaries.
In addition to audit fees, Capitol and its subsidiaries paid fees to its
independent auditors for non-audit services for 2000 in the aggregate amount of
$93,038. Those non-audit services consisted primarily of preparation of tax
returns for Capitol and its subsidiaries, audits of employee benefit plans and
post-report review procedures associated with registration statements of Capitol
or its subsidiaries filed with the Securities and Exchange Commission. There
were no fees regarding financial information systems design and implementation
services.
The Audit Committee considered the compatibility of the non-audit services
Capitol received from its auditors and the independence of the independent
auditors.
AUDIT COMMITTEE
Gary A. Falkenberg, Chairman
H. Nicholas Genova
Michael L. Kasten
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee consists of three directors, Mr. Kasten, Ms.
Gaskin and its Chairman, Mr. Miller, who are not employed by Capitol and are not
eligible to participate in any of Capitol's benefit plans other than Capitol's
Directors' Stock Option Plan.
The Compensation Committee meets for the purpose of reviewing compensation
and benefit levels for Capitol's management and making related recommendations
to Capitol's Board of Directors. During 2000, two meetings of the Compensation
Committee were held. All committee members attended 100% of the meetings with
the exception of Ms. Gaskin who attended 50% of the meetings.
The compensation committee is responsible for developing and making
recommendations to the Board of Directors with respect to the Corporation's
executive compensation program. The compensation program has been developed to
help the Corporation attract and retain quality talent, which is critical to
both the short-term and long-term success of the Corporation. The Committee has
endeavored to develop a compensation program that:
1) provides incentives and rewards for superior performance, both on an
individual and corporate basis,
2) aligns the interests of the executive officers with the interest of
the shareholders,
3) provides long-term incentive for retention of its key officers.
In its review of the total compensation package, the Committee has reviewed
various compensation surveys and examines the compensation practices of peers as
well as the consideration of individual efforts for the benefit of the
Corporation and various subjective measures in determining the adequacy and
appropriateness of the compensation of executives at Capitol. The Committee also
considers the increase in the cost of living that impacts its executive officers
that are required to spend certain periods of time at subsidiary offices.
The Corporation offers various forms of compensation which include base
salary, incentive compensation, and benefits.
5
BASE SALARIES
In determining the base salary amounts for the executives, the Committee
considers individual performance, experience, expertise, and tenure as well as
the compensation levels established by peers. The compensation of the executives
is recommended by the CEO and reviewed and approved by the Committee. The CEO's
compensation is set by the Committee and presented to the full Board of
Directors for approval.
Total salary information for the CEO and the next four most highly
compensated executive officers for the year 2000 is set forth on page 9. Such
amounts include compensation paid to the executives by subsidiaries of Capitol
which are not wholly-owned. Compensation paid by those affiliates is set by the
respective affiliates' Boards of Directors. The Committee considers affiliated
compensation in its review of the executive's pay level. Base salaries at
Capitol (exclusive of the non-bank subsidiaries) in 2000 were $474,933 for Mr.
Reid, $210,272 for Mr. Carr, $113,568 for Mr. Hendrickson, $148,750 for Mr.
Ballard and $50,294 for Ms. English.
INCENTIVE COMPENSATION
Capitol has implemented an incentive compensation program which is
performance driven. It is divided into two parts, one subjective, the other
based strictly on ROE targets. The subjective test evaluates executives based on
their contribution to the safety and soundness of the organization including
such factors as credit quality, capital management, personnel management,
regulatory compliance, and contribution to long-term shareholder value. ROE
targets are set annually by the Board of Directors. In order to be eligible to
receive incentive compensation, targets must be reached.
The incentive compensation program seeks to align the interests of the
executives with the shareholders by setting aggressive performance targets that
enhance the value of Capitol. The incentive compensation is paid in part in cash
and in part in stock options. The options awarded pursuant to the policy have a
vesting period which incents the executive to remain with Capitol in order to
realize the full value of the compensation. The incentive compensation program
was put in place at Capitol and all of its affiliated subsidiaries to align the
interests of all of the executives in the affiliated subsidiaries with the
shareholders of Capitol.
DISCRETIONARY AWARDS OF STOCK OPTIONS
Capitol has used the discretionary award of stock options primarily as a
tool in its recruitment of executive officers. None of the top five most highly
compensated executives were given a discretionary award of stock options in the
year 2000, other than as part of the incentive compensation program outlined
above.
EXECUTIVE SUPPLEMENTAL INCOME PROGRAM
In an effort to retain the long-term services of its executives, Capitol
has put in place an executive supplemental income program. It provides for the
payment to certain senior officers or designated beneficiary an annual benefit
which is approximately equal to the annual base salary, for a period of fifteen
years in the event of either the employee's retirement or the death of the
employee before attaining retirement age. In the event of a change of control of
Capitol (as defined in the agreements) which is not approved by Capitol's Board
of Directors, the agreements provide for a lump sum distribution. In certain
circumstances early retirement may be permitted providing a reduced benefit to
the employee. The benefit liabilities under the agreements are covered by funded
insurance contracts by Capitol and/or its subsidiaries. Each of the individuals
listed in the Summary Compensation Table has entered into an executive
supplemental income agreement with Capitol except for Mr. Reid and Ms. English.
BENEFIT PLANS
Long term incentives to align the interests of Capitol's executives with
the shareholders have been developed through the development of an ESOP program.
The program provides for an award of Capitol's common stock subject to vesting.
All employees, with the exception of the CEO, are eligible to participate in the
program after meeting certain length of service and age limitations.
The company has established a 401(k) plan, health insurance and other
programs that are usual and customary to encourage retention of Capitol's
employees.
6
CEO COMPENSATION
The compensation of the CEO is set based on the Committee's review of
performance objectives for Capitol which include asset and revenue growth,
development of additional banking subsidiaries, asset quality, identification of
strategic opportunities, development and maturation of the existing
subsidiaries, and core earnings performance.
Joseph D. Reid has been the CEO of Capitol since its inception and is
relied on by the Board of Directors to provide effective leadership and execute
a successful strategic plan for the entire organization. Capitol has grown over
the past 12 years from a one-bank holding company to a publicly-traded bank
development company with 5 bank development subsidiaries and 27 banks operating
in 6 states. Mr. Reid has been responsible for the oversight and development of
each of the subsidiary companies and the development of their respective boards
of directors and executive management teams. Mr. Reid is responsible for the
continued performance of the banks as they mature to ensure they reach
acceptable levels of performance.
In evaluating the compensation level of the CEO, the Committee has
considered among the other factors set forth above, the overall contribution by
Mr. Reid to Capitol and its development and his tenure with the organization.
During the course of 2000, Capitol developed 5 new banking subsidiaries,
increased earnings by 36% from the previous year and had a 25% increase in the
total assets of the company under his leadership and guidance. During this
period, asset quality has been consistently maintained within satisfactory
levels.
Capitol has an employment agreement with Joseph D. Reid under which he
serves as Chairman of the Board, President and Chief Executive Officer of
Capitol. The term of the employment agreement is three years. It is
automatically extended for an additional year each January 1 unless either party
gives written notice to the contrary. Mr. Reid's employment agreement, as
amended, requires Capitol to issue Mr. Reid certain stock options in the event
of any new issuance of common stock equal to 10% of the sum of the additional
shares issued and the shares subject to the options. The exercise price of
additional stock options is established by the Board of Directors based on the
fair market price of common stock at the time of issuance of the option but not
less than $6.06 per share. Each option expires seven years after its date of
issuance.
Certain affiliates of Capitol have separately entered into employment
agreements with Mr. Reid. These agreements are separately approved and
authorized by the affiliate's independent boards of directors. The agreements
may provide for annual salary, discretionary bonuses and/or stock options. The
compensation table presented on page 9 discloses total salary and bonus paid to
Mr. Reid from Capitol and its consolidated subsidiaries.
Capitol also has an agreement whereby, upon Mr. Reid's death, his estate
may request Capitol to purchase, from the estate, up to $2.5 million of
Capitol's common stock then held by the estate. Capitol's obligation is covered
by company-owned life insurance.
COMPENSATION COMMITTEE
Lyle W. Miller, Chairman
Kathleen A. Gaskin
Michael L. Kasten
7
STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG CAPITOL BANCORP LIMITED,
NASDAQ MARKET INDEX, AND SNL $1B - $5B BANK ASSET-SIZE INDEX
Below is a graph which summarizes the cumulative return experienced by
Capitol's shareholders over the last five years compared to the SNL $1B -$5B
Bank Asset-Size Index, and the cumulative total return on the NASDAQ Market
Value Index. (Broad Market Index). This presentation assumes that the value of
the investment in Capitol's common stock and each index was $100 on December 31,
1995 and that subsequent cash dividends were reinvested.
TOTAL RETURN PERFORMANCE
PERIOD ENDING
---------------------------------------------------------------
INDEX 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ----- -------- -------- -------- -------- -------- --------
Capitol Bancorp Limited 100.00 169.19 383.42 318.17 161.02 155.96
NASDAQ - Total US* 100.00 123.04 150.69 212.51 394.92 237.62
SNL $500M-$1B Bank Index 100.00 125.01 203.22 199.81 184.96 177.04
SNL $1B-$5B Bank Index 100.00 129.63 216.19 215.69 198.23 224.95
8
EXECUTIVE COMPENSATION
The following table summarizes compensation paid to the CEO and the next
four most highly compensated executive officers of Capitol for each of the three
years in the period ended December 31, 2000:
SUMMARY COMPENSATION TABLE
Long-term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------------ ------------------- -------
Other
Annual Restricted Number of
Name and Principal Compen- Stock Options/ LTIP All Other
Position/Year Salary Bonus sation(a) Award(s) SARs Payouts Compensation(b)
------------- ------ ----- --------- -------- ---- ------- ---------------
Joseph D. Reid
Chairman, President and CEO of
Capitol and Chairman and CEO of
Sun Community Bancorp Limited:
2000 $821,702(c) $ -0- 61,945 -0- $121,494(d)
1999 687,736(c) -0- -0- -0- 31,706(e)
1998 518,500(c) -0- -0- -0- 5,000
Robert C. Carr
Treasurer and Executive Vice
President of Capitol:
2000 215,122(c) 26,400 -0- -0- 8,364
1999 193,627(c) 33,500 -0- -0- 11,064
1998 170,000 33,500 -0- -0- 16,088
Lee W. Hendrickson
Executive Vice President and Chief
Financial Officer of Capitol and of
Sun Community Bancorp Limited:
2000 213,952(c) 12,000 -0- -0- 5,917
1999 177,854(c) 15,000 -0- -0- 5,767
1998 130,961(c) 15,000 -0- -0- 8,481
Paul R. Ballard
Executive Vice President of Capitol;
CEO Portage Commerce Bank
2000 173,750(c) 30,000 -0- -0- 7,785
1999 181,827(c) 30,000 -0- -0- 9,590
1998 150,000 30,000 -0- -0- 14,948
Cristin Reid English
Executive Vice President of Capitol
and of Sun Community Bancorp Limited
2000 160,729(c) 8,200 -0- -0- 2,874
1999 130,314(c) 4,000 -0- -0- 2,625
1998 83,746(c) 4,000 -0- -0- 1,455
- ----------
(a) No amounts greater than $50,000, or 10% of stated salary amount.
(b) Amounts contributed by Capitol's ESOP and 401(k) programs to the extent
applicable.
(c) Includes amounts paid by subsidiaries of Capitol which are not
wholly-owned. Amounts of salary and other compensation, as shown, have not
been reduced pro rata to reflect Capitol's ownership percentage of
subsidiaries.
(d) Includes $5,250 which was contributed from the Capitol 401(k) program and
$116,244 representing reimbursement for interest paid on a loan from
Capitol.
(e) Includes $4,658 which was contributed from the Capitol 401(k) program and
$27,048 representing reimbursement for interest paid on a loan from
Capitol.
9
Capitol has an employment agreement with Joseph D. Reid (see Compensation
Committee Report, CEO Compensation).
Capitol has employment agreements with Paul Ballard, Robert Carr, and Lee
Hendrickson. Except for the salaries, the terms of each agreement currently in
force are substantially identical. The term of each agreement is three years and
is extended automatically for one year each January 1 unless either party gives
written notice to the contrary. In addition to their salaries, each employee is
entitled to various fringe benefits and a discretionary bonus. All employees are
entitled to disability benefits under prescribed circumstances.
Option/SAR Grants in Last Fiscal Year
Number of
Securities % of Total Options/
Underlying SARs Granted to Grant Date
Options/SARs Employees in Exercise or Base Expiration Present
Name Granted (#) Fiscal Year Price ($/Sh) Date Value (a)
- ---- ----------- ----------- ------------ ---- ---------
Joseph D. Reid 23,121 36.85 12.625 2006 $ 90,608
" 24,974 39.80 13.477 2006 94,171
" 13,872 22.11 10.848 2007 60,090
" 778 1.24 12.500 2007 3,174
(a) Value estimated using a version of the Black-Scholes option pricing model
based on information included in the table above as well as dividend yield
and stock price information, and certain assumptions relating to the
volatility of Capitol's stock and a risk-free interest rate.
Aggregated Options/SARs Exercised in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
Number of Unexercised Value of Unexercised In-the
Options/SARs at Fiscal -Money Options/SARs at
Shares Acquired Year-End Fiscal Year-End
Name on Exercise Value Realized Exercisable/Unexercisable(b) Exercisable/Unexercisable(b)
- ---- ----------- -------------- ---------------------------- ----------------------------
Joseph D. Reid:
Capitol Bancorp Limited -0- $ -0- 383,485 $ 78,147 (c)
Sun Community Bancorp Limited -0- -0- 275,194 325,000 (d)
Robert C. Carr -0- -0- 39,600 56,530 (c)
Paul R. Ballard 6,000 8,450 15,600 15,130 (c)
Lee W. Hendrickson:
Capitol Bancorp Limited -0- -0- 2,400 -0- (c)
Sun Community Bancorp Limited -0- -0- 10,500 10,312 (d)
Cristin Reid English:
Capitol Bancorp Limited -0- -0- -0- -0- (c)
Sun Community Bancorp Limited -0- -0- 11,500 10,312 (d)
- ----------
(a) Based on approximate average market price per share during month of
exercise less exercise price of stock options, multiplied by number of
stock options exercised.
(b) All outstanding options are currently exercisable.
(c) Capitol's common stock is traded on the Nasdaq Stock Market(SM) under the
symbol CBCL. Value is based on December 31, 2000 closing price of $9.75 per
share as reported by Nasdaq.
(d) Sun's common stock is traded on the Nasdaq Stock Market(SM) under the
symbol SCBL. Value is based on December 31, 2000 closing price of $7.375
per share as reported by Nasdaq.
10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Capitol's banking subsidiaries have, in the normal course of business, made
loans to certain directors and officers of Capitol and its subsidiaries and to
organizations in which certain directors and officers have an interest. As of
December 31, 2000, the outstanding principal balance of such loans was $66.1
million, representing 93.9% of shareholders' equity. In the opinion of
management, such loans were made in the ordinary course of business and were
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with unrelated
parties and did not involve more than the normal risk of collectibility or
present other unfavorable features. Capitol has a written policy that all loans
to, and all transactions with, Capitol's officers, directors, affiliates and/or
shareholders holding 10% or more of Capitol's common stock will be made or
entered into for bona fide business purposes, on terms no less favorable than
could be made to, or obtained from, unaffiliated parties, and shall be approved
by a majority of Capitol's directors, including a majority of the independent
disinterested directors.
In 1999, Capitol agreed to a one-time exercise of previously granted stock
options with an aggregate exercise price of $1.6 million funded by a note
receivable of $1.9 million from Mr. Reid. The note bears interest at a fixed
rate. As part of the terms of this agreement, Mr. Reid's compensation will be
increased in an amount equal to the interest due on the note receivable. Under
certain circumstances, such as the death of Mr. Reid, the note will be forgiven.
The death benefit is covered by company-owned life insurance.
Portage Commerce Bank leases its primary banking facility from Portage
Commerce Investors LLC. Messrs. Kasten and Becker are members of the limited
liability leasing entity. Rent paid by Portage Commerce Bank to the leasing
entity amounted to $207,871 in 2000. Brighton Commerce Bank leases its primary
banking facility from Tri-O Development. Three of Mr. O'Leary's adult children
are members of the leasing entity. Rent paid by Brighton Commerce Bank to the
leasing entity amounted to $227,086 in 2000. Capitol and Capitol National Bank
paid rent of $368,328 during 2000 for their principal offices at One Business &
Trade Center, 200 Washington Square North, Lansing, Michigan to Business & Trade
Center Limited, a Michigan limited partnership, under lease agreements with
expiration dates ranging from 2000 to 2003 and portions of which are renewable
for periods of 2.5 years. Joseph D. Reid and L. Douglas Johns are partners of
the Partnership. The lease rates represent what Capitol believes to be fair
market value in the respective markets. All leasing arrangements which involve
insiders are reported to bank regulatory agencies prior to their commencement.
Capitol and some of its bank subsidiaries utilize the law firm of Lasky
Fifarek & Hogan from time to time. Charles L. Lasky is president of that law
firm and is Mr. Reid's brother-in-law. Amounts paid by Capitol and its
subsidiaries to the law firm amounted to $69,800 in 2000. Mr. Lasky is a member
of the Board of Directors of Capitol's Nevada bank subsidiaries.
Capitol and certain of its affiliates utilized the services of attorney
Brian K. English in the year 2000. Mr. English served as counsel to the entities
providing contract review, transactional assistance, leasing and other legal
services. Mr. English was paid a total of $78,158 by the affiliated entities.
Mr. English is the husband of Cristin Reid English and the son-in-law of Joseph
D. Reid.
Capitol and its subsidiaries, on a consolidated basis, own approximately
20% of the outstanding common stock of Access BIDCO, LLC, with an aggregate
carrying value of $895,000 at December 31, 2000. Access BIDCO is a business and
industrial development corporation, regulated by the Michigan Office of
Financial and Insurance Services which is the same state agency that regulates
state-chartered commercial banks and other state-chartered financial
institutions. As a Michigan BIDCO, Access BIDCO is a non-depository financial
institution engaged in making loans and providing other financing and management
assistance to Michigan businesses as permitted under the Michigan BIDCO Act.
Joseph D. Reid, Chairman and Chief Executive Officer of Access BIDCO,LLC
serves as a director of Access BIDCO and its majority-owned subsidiary, Onset
BIDCO. In his capacity as an executive officer of Access BIDCO, Mr. Reid
received cash compensation in 2000 in the form of a salary in the amount of
$100,000. Mr. Reid also owns 4.5% of the outstanding common stock of Access
BIDCO. In addition to the relationship between Mr. Reid and Access BIDCO,
Executive Vice President and Chief Financial Officer of Capitol, Lee W.
Hendrickson, serves as Vice President, Chief Financial Officer, and a director
of Access BIDCO and its majority-owned subsidiary. Mr. Hendrickson received a
salary from Access BIDCO for his services as an executive officer of Access
BIDCO. Cristin Reid English, Executive Vice President of Capitol Bancorp is a
director of Access BIDCO, and also a director of its majority-owned subsidiary.
11
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
BDO Seidman, LLP served as independent auditors for Capitol for the year
ended December 31, 2000. Representatives of BDO Seidman, LLP will be present at
the meeting to respond to appropriate questions and will have the opportunity to
make a statement if they desire to do so.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, including
matters relating to the conduct of the meeting, it is intended that proxies in
the accompanying form will be voted in respect thereof in accordance with the
judgment of those voting the proxies.
MISCELLANEOUS
The cost of solicitation of proxies will be borne by Capitol. In addition
to solicitations by mail, directors, officers and regular employees of Capitol
may solicit proxies personally or by telephone without additional compensation.
Capitol's 2000 Annual Report to Shareholders is being provided herewith.
Any shareholder who does not receive a copy of the annual report may obtain a
copy by writing Capitol. The annual report also may be viewed by accessing
Capitol's web site at http://www.capitolbancorp.com. The annual report is not to
be treated as a part of the proxy solicitation material nor as having been
incorporated herein by reference.
FORM 10-K
A copy of Capitol's 2000 Form 10-K, without exhibits, is available to
shareholders without charge upon written request to: Capitol Bancorp Limited,
One Business & Trade Center, 200 Washington Square North, Lansing, Michigan
48933, Attention: Investor Relations.
Form 10-K, and certain other periodic filings, are filed with the
Securities and Exchange Commission. The SEC maintains an Internet web site that
contains reports, proxy and information statements and other information
regarding companies which file electronically (which includes Capitol). The
SEC's web site address is http:\\www.sec.gov. Capitol's filings with the SEC can
also be accessed through Capitol's web site, http:\\www.capitolbancorp.com.
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in Capitol's proxy material for next
year's annual meeting of shareholders, any shareholder proposal to take action
at such meeting must be received at Capitol's main office at One Business &
Trade Center, 200 Washington Square North, Lansing, Michigan 48933, no later
than November 20, 2001. Any such proposal shall be subject to the requirements
of the proxy rules adopted under the Securities Exchange Act of 1934, as
amended.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Joseph D. Reid
JOSEPH D. REID
CHAIRMAN OF THE BOARD
LANSING, MICHIGAN
MARCH 23, 2001
12
APPENDIX
AUDIT COMMITTEE CHARTER
Capitol Bancorp Limited
MAY 2000 REVISION
PREFACE
This Audit Committee Charter has been drafted in accordance with requirements of
the NASDAQ stock market, as it applies to Capitol Bancorp Limited. In accordance
with the NASDAQ rules, this charter will be reviewed and reassessed by the Audit
Committee annually. This charter has been reviewed and approved by Capitol's
Board of Directors at its May 2000 meeting. Any future revisions to the charter
shall be subject to review and approval by Capitol's Board of Directors.
PURPOSE OF THE AUDIT COMMITTEE
The Audit Committee is responsible for various matters relating to auditing of
the Corporation and its subsidiaries. This includes:
* Recommending to the Board of Directors the selection, evaluation and
replacement of a qualified firm to perform an annual audit of the
Corporation's consolidated financial statements,
* Reviewing the results of the independent auditors' audit of the
Corporation's consolidated financial statements,
* Obtaining a periodic letter from the independent auditors confirming that
firm's independence,
* Monitoring disclosed relationships or services which may impact audit
objectivity and independence, and
* Evaluating policies and procedures and reviewing results of the
Corporation's internal audit function.
ACCOUNTABILITY OF INDEPENDENT AUDITORS
The independent auditors are accountable to the Corporation's Board of Directors
and its Audit Committee.
AUDIT COMMITTEE COMPOSITION
The Audit Committee membership is based on the following:
* There must be a minimum of three independent directors, appointed by the
Corporation's Board of Directors,
A-1
* All Audit Committee members must be able to read and understand fundamental
financial statements, including a balance sheet, income statement and cash
flow statement or will become able to do so within a reasonable period of
time after his or her appointment to the Audit Committee, and
* At least one member must have past employment experience in finance or
accounting, requisite professional certification in accounting or any other
comparable experience or background which results in the individual's
financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities.
OTHER MATTERS
The Audit Committee shall meet at least two times per calendar year. Meetings of
the Audit Committee may be requested by the Audit Committee Chairperson, the
Corporation's independent auditors, the Corporation's internal auditor or by the
Chairman of the Board of Directors. The Audit Committee will meet from time to
time with the Corporation's independent auditors, including a portion of such
meetings without management present. The Audit Committee or its Chairperson (in
the absence of a meeting of the Audit Committee) may discuss matters relating to
the Corporation' interim financial statements or results of operations with
management and the results of any interim reviews of such interim financial
information performed by the Corporation's independent auditors. The Audit
Committee may prepare an annual report of its activities for submission to the
Corporation's Board of Directors and for inclusion in the Corporation's annual
meeting/proxy materials.
The remainder of this page intentionally left blank.
A-2
[FRONT OF CARD]
PROXY
CAPITOL BANCORP LIMITED
One Business & Trade Center
200 Washington Square North
Lansing, MI 48933
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph D. Reid and David O'Leary as Proxies,
each with the power to appoint his substitute and hereby authorizes them to
represent and to vote as designated below, all the shares of Common Stock of
Capitol Bancorp Limited held of record by the undersigned on March 9, 2001 at
the Annual Meeting of Shareholders to be held on May 3, 2001, or any adjournment
thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. Election of Directors:
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to vote for
(except as marked to the contrary) all nominees listed below
Louis G. Allen Douglas E. Crist Kathleen A. Gaskin Leonard Maas
Paul R. Ballard James C. Epolito H. Nicholas Genova Lyle W. Miller
David L. Becker Gary A. Falkenberg Lewis D. Johns David O'Leary
Robert C. Carr Joel I. Ferguson Michael L. Kasten Joseph D. Reid
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
[REVERSE OF CARD]
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this Proxy will be voted
"FOR" the Proposals.
Please sign this proxy exactly as your name
appears on the books of the company. Joint
owners should each sign personally. Trustees and
other fiduciaries should indicate the capacity
in which they sign, and where more than one name
appears, a majority must sign. If a corporation,
this signature should be that of an authorized
officer who should state his or her title.
Date _____________________________________, 2001
Signature ______________________________________
Signature ______________________________________
if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Please indicate whether you plan to attend the
Annual Meeting of Stockholders:
[ ] WILL ATTEND _________ NUMBER OF PERSONS
[ ] WILL NOT ATTEND