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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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 COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
CAPITAL HOLDINGS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(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: .......
(2) Aggregate number of securities to which transaction applies: ..........
(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): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] 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: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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CAPITAL HOLDINGS, INC.
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
ANNUAL SHAREHOLDERS MEETING
MAY 5, 1999
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CAPITAL HOLDINGS, INC.
5520 Monroe Street
Sylvania, OH 43560
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD
May 5, 1999
TO THE HOLDERS OF SHARES OF COMMON STOCK:
Notice is hereby given that the Annual Meeting of the Shareholders of
Capital Holdings, Inc. (the "Corporation") will be held at The Franciscan Life
Center, Lourdes College, 6832 Convent Boulevard, Sylvania, Ohio, on Wednesday,
May 5, 1999, at 6:30 p.m. (local time), for the purpose of considering and
voting upon the following matters:
1. The election of five Directors (to be elected to Class III of the
Corporation's staggered Board of Directors) to serve a three-year term or
until their successors shall have been elected and qualified.
2. To consider and act upon an amendment to Article Fourth of the Corporation's
Articles of Incorporation to increase the total number of the Corporation's
authorized no par value common shares from 3,000,000 to 20,000,000 and to
effect a three for one stock split.
3. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
OR ANY ADJOURNMENT THEREOF. THE BOARD OF DIRECTORS AT PRESENT KNOWS OF
NO OTHER BUSINESS TO BE PRESENTED BY OR ON BEHALF OF THE CORPORATION.
Shareholders of record at the close of business on March 15, 1999, are
the only shareholders entitled to notice of and to vote at the Annual
Shareholders Meeting.
By order of the Board of Directors
/s/ John S. Szuch
John S. Szuch, Chairman and Chief
Executive Officer
April 7, 1999
IMPORTANT
WHETHER YOU EXPECT TO ATTEND THE MEETING OR NOT, PLEASE MARK, SIGN,
DATE, AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE AS PROMPTLY AS POSSIBLE. NO POSTAGE IS REQUIRED.
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CAPITAL HOLDINGS, INC.
SYLVANIA, OHIO
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Capital Holdings, Inc. (the "Corporation") of
proxies to be voted at the Annual Meeting of Shareholders to be held on
Wednesday, May 5, 1999, in accordance with the foregoing notice.
Capital Holdings, Inc. is a registered bank holding company of which
Capital Bank, N.A. (hereinafter collectively "Corporation") is its principal
subsidiary.
The solicitation of proxies on the enclosed form is made on behalf of
the Board of Directors of the Corporation. All costs associated with the
solicitation will be borne by the Corporation. The Corporation does not intend
to solicit proxies other than by use of the mails, but certain officers and
regular employees of the Corporation or its subsidiaries, without additional
compensation, may use their personal efforts, by telephone or otherwise, to
obtain proxies. The proxy materials are first being mailed to shareholders on
April 7, 1999.
Any shareholder executing a proxy has the right to revoke it by the
execution of a subsequently dated proxy, by written notice delivered to the
Secretary of the Corporation prior to the exercise of the proxy or in person by
voting at the meeting. The shares will be voted in accordance with the direction
of the shareholder as specified on the proxy. In the absence of instructions,
the proxy will be voted "FOR" the election of the five persons listed in this
Proxy Statement.
VOTING SECURITIES
Only shareholders of record at the close of business on March 15, 1999,
will be eligible to vote at the Annual Meeting or any adjournment thereof. As of
March 15, 1999, the Corporation had outstanding 2,023,625 shares of no par value
common stock. Shareholders are entitled to one vote for each share of common
stock owned as of the record date, and shall have the right to cumulate votes in
the election of Directors in accordance with Ohio law. Cumulative voting permits
a shareholder to multiply the number of shares held by the number of directors
to be elected, and cast those votes for one candidate or spread those votes
among several candidates as he or she deems appropriate.
All Directors and Executive Officers of the Corporation as a group
(comprised of eighteen individuals), beneficially held 534,113 shares of the
Corporation's common stock as of March 15, 1999, representing 26.39 percent of
the outstanding common stock of the Corporation.
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PROPOSAL #1 ELECTION OF DIRECTORS AND INFORMATION
WITH RESPECT TO DIRECTORS AND OFFICERS
CLASSIFICATION SYSTEM FOR THE ELECTION OF DIRECTORS
The Corporation has a staggered system for the election of Directors.
Directors are divided into three classes as nearly equal in number as possible.
The Corporation has sixteen Directors, and they are elected to serve a
three-year term.
INFORMATION WITH RESPECT TO NOMINEES
The following information is provided with respect to each Class III
(term to expire in 2002) nominee for Director and each present and continuing
Director whose term of office extends beyond the Annual Meeting of the
Corporation's Shareholders. Those nominees receiving the greatest number of
votes will be elected as Directors. There is no minimum number of votes required
to elect a Director.
Director of the
Name and Age Principal Occupation Past 5 Years Corporation Since
- ------------ --------------------------------- -----------------
George A. Isaac, III President and Chief Executive Officer of The 1988
(45) Isaac Corporation (scrap processor/broker;
commercial real estate and development);
Director of the Corporation
Bruce K. Lee (1) Executive Vice President and Director 1999
(38) of the Corporation
W. Geoffrey Lyden, III President of The Lyden Company (petroleum 1988
(46) marketing); Director of the Corporation
James D. Sayre President of M&S Manufacturing Co. 1988
(53) (automotive parts supplier); Director
of the Corporation
John S. Szuch Chairman of the Board of Directors, Chief 1988
(50) Executive Officer and Director of the
Corporation
THE DIRECTORS UNANIMOUSLY RECOMMEND A VOTE IN FAVOR OF THIS PROPOSAL #1.
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INFORMATION WITH RESPECT TO DIRECTORS NOT STANDING FOR REELECTION
CLASS I - (CONTINUING DIRECTORS WITH TERM TO EXPIRE 2000)
Director of the
Name and Age Principal Occupation Past 5 Years Corporation Since
- ------------ --------------------------------- -----------------
James M. Appold President of Consolidated Biscuit Co. 1988
(59) (consumer food business); Director of
the Corporation
David P. Bennett President of Bennett Enterprises, Inc. 1988
(69) (restaurant business); Director of the
Corporation
Yale M. Feniger Chief Executive Officer of Fen Ltd. 1988
(78) (airplane sales); Director of the Corporation
Harley J. Kripke President of Kripke & Associates, Inc. 1999
(60) (steel recycling/brokerage); Director of the
Corporation
Thomas W. Noe President of Vintage Coins & Cards 1988
(44) (coin dealer); Director of the Corporation
{THIS SPACE INTENTIONALLY LEFT BLANK}
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CLASS II - (CONTINUING DIRECTORS WITH TERM TO EXPIRE 2001)
Director of the
Name and Age Principal Occupation Past 5 Years Corporation Since
- ------------ --------------------------------- -----------------
Michael C. Landin (2) President of Michael Landin Associates 1988
(55) (clothing broker); Director of the
Corporation
Ronald R. Langenderfer President of Centaur, Inc. (steel service center); 1988
(54) Director of the Corporation
Joel A. Levine Spengler Nathanson of Counsel P.L.L.; 1988
(60) Director of the Corporation
Noel S. Romanoff Chief Executive Officer of Romanoff Electric 1988
(57) Corp. (electrical contractor); Director of the
Corporation
Scott J. Savage (3) President of SJS Investment Consulting, Inc. 1999
(35) (investment advisor); Director of the Corporation
Robert A. Sullivan President, Chief Operating Officer, Secretary 1988
(44) and Director of the Corporation
(1) Mr. Lee previously served as Senior Vice President - Lending of Capital
Bank, N.A. from August 1988 to June 1997.
(2) Mr. Landin previously served as President - Landin & Landin Clothiers, Inc.
from January 1993 to November 1996.
(3) Mr. Savage previously served as Executive Vice President - Continental
Capital from June 1986 to June 1995.
The business experience of each of the above-listed nominees and
Directors during the past five years was that typical to a person engaged in the
principal occupation listed. Unless otherwise indicated, each of the nominees
and Directors has had the same position or another executive position with the
same employer during the past five years.
Shareholders desiring to nominate individuals to serve as Directors may
do so by following the procedure outlined in the Corporation's Code of
Regulations requiring advance notice to the Corporation of such nomination and
certain information regarding the proposed nominee.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth the number and percentage of shares of
common stock owned by the Directors and named Executive Officers of the
Corporation and the name and address of any five percent or greater holder of
the Corporation's common stock.
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
NAME MARCH 15, 1999 PERCENTAGE
---- ----------------------- ----------
James M. Appold 33,696 (1) 1.67%
David P. Bennett 30,903 (2) 1.53
Yale M. Feniger 22,393 (3) 1.11
George A. Isaac, III 46,237 (4) 2.28
Michael P. Killian 8,906 (5) *
Stephen J. Kovatch 1,973 *
Harley J. Kripke 28,999 (6) 1.43
Michael C. Landin 8,527 (7) *
Ronald R. Langenderfer 33,472 (8) 1.65
Bruce K. Lee 12,972 (9) *
Joel A. Levine 13,451 (10) *
W. Geoffrey Lyden, III 31,916 (11) 1.58
Thomas W. Noe 7,665 (12) *
Noel S. Romanoff 61,026 (13) 3.02
Scott J. Savage 7,732 (14) *
James D. Sayre 17,428 (15) *
Robert A. Sullivan 87,118 (16) 4.31
John S. Szuch 79,699 (17) 3.94
------
All Directors and Executive Officers
as a Group (18 persons) 534,113 26.39%
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*Represents less than one percent.
All shares shown as beneficially owned are shares over which the named person
exercises sole voting or investment power except as set forth below and include
options issued to Executive Officers under the terms of the Corporation's
Incentive Stock Option Plans which are exercisable within 60 days of the date
for which disclosure is provided.
(1) Includes 4,110 option shares exercisable within 60 days.
(2) Includes 313 shares held by spouse and 4,110 option shares exercisable
within 60 days.
(3) Includes 4,263 option shares exercisable within 60 days.
(4) Includes 2,418 shares held by spouse, 5,100 shares held in child's trust
and 4,010 option shares exercisable within 60 days.
(5) Includes 1,828 shares held as custodian for minor children and 1,973 option
shares exercisable within 60 days.
(6) Includes 12,332 shares held by spouse and 7,095 shares held as custodian
for children.
(7) Includes 4,263 option shares exercisable within 60 days.
(8) Includes 1,751 shares held in child's trust and 4,263 option shares
exercisable within 60 days.
(9) Includes 726 shares held in child's trust and 1,973 option shares
exercisable within 60 days.
(10) Includes 4,263 option shares exercisable within 60 days.
(11) Includes 20,038 shares held by The Lyden Company, 1,214 shares held by
spouse, 48 shares held in child's trust and 4,160 option shares
exercisable within 60 days.
(12) Includes 4,413 option shares exercisable within 60 days.
(13) Includes 4,107 option shares exercisable within 60 days.
(14) Includes 126 shares held by spouse.
(15) Includes 4,213 option shares exercisable within 60 days.
(16) Includes 23,148 shares held by spouse and 4,310 shares held as custodian
for minor children.
(17) Includes 22,793 shares held by spouse and 6,572 shares held as custodian
for minor children.
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COMMITTEES AND COMPENSATION OF THE BOARD OF DIRECTORS
The Board of Directors conducts its business through meetings of the
Board and through its committees. In accordance with the Code of Regulations of
the Corporation, the Board of Directors has appointed and maintains an Audit
Committee, Compensation Committee, Investment Committee, Nominating Committee,
Securities Committee and Loan Committee.
The Audit Committee reviews with the Corporation's independent
auditors, the audit plan, the scope and results of their audit engagement and
the accompanying management letter, if any; reviews the scope and results of the
Corporation's internal auditing procedures; consults with the independent
auditors and management with regard to the Corporation's accounting methods and
the adequacy of its internal accounting controls; approves professional services
provided by the independent auditors; reviews the independence of the
independent auditors; and reviews the range of the independent auditors' audit
and nonaudit fees. The Audit Committee is composed of Messrs. Feniger, Isaac,
Langenderfer, Levine and Sayre (Chairman). The Audit Committee met three times
during 1998.
The Compensation Committee is responsible for administering the
Corporation's employee benefit plans including its stock option plans; setting
the compensation of the Chairman of the Board, President, Executive Vice
President and all Senior Vice Presidents; reviewing the criteria that form the
basis for management's officer and employee compensation recommendations and
reviewing management's recommendations in this regard. The Compensation
Committee is composed of Messrs. Isaac (Chairman), Levine, Noe, Romanoff, Sayre,
Sullivan and Szuch. The Compensation Committee met eight times during 1998.
The Investment Committee is responsible for reviewing the securities
portfolio of the Bank. The Corporation's Securities Committee reviews and makes
recommendations to the full Board on matters affecting the market for the
Corporation's common stock and the Corporation's dividend policy. The Loan
Committee reviews loan policy matters and approves loan requests as required by
internal policy.
The Nominating Committee is responsible for review of existing
Directors whose terms are expiring to determine whether they meet the criteria
for renomination for another term, recommendations for replacements or additions
to the Board of Directors for presentation to the full Board, review of Director
performance, and maintenance and review of a list of potential future
candidates. The Nominating Committee is composed of Messrs. Langenderfer, Lyden,
Romanoff, Szuch and Sullivan (Chairman). The Nominating Committee met one time
during 1998.
The Board of Directors of the Corporation meets monthly for its regular
meetings and upon call for special meetings. During 1998, the Board met 12
times. All Directors of the Corporation attended at least 75 percent of the
Board and Committee Meetings that they were scheduled to attend during 1998.
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The Corporation compensates directors, other than those persons who
serve as officers of the Corporation and its subsidiary, Capital Bank, N.A., in
options of the Corporation's common stock pursuant to the Capital Holdings, Inc.
Nonemployee Director Stock Option Plan (the "Director Option Plan"). Pursuant to
the Director Option Plan, directors of the Corporation receive an option grant
of 500 shares annually as a retainer and 50 shares per regular Board meeting
attended. All options granted under the Director Option Plan contain an exercise
price equal to the shares' fair market value as of the date of grant. Directors
receive no cash compensation for their service as a director except for
committee service, for which directors who are not employees of the Corporation,
receive $350 per committee meeting attended.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Corporation and/or its subsidiaries, to or
on behalf of the Corporation's Chairman and Chief Executive Officer and the four
most highly compensated individuals for the fiscal years ended December 31,
1998, 1997, and 1996.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
-------------------------------- -------------
Name and Option # All Other
Principal Position Year Salary(1) Bonus(2) Awards(shares) Compensation(3)
- ------------------ ---- --------- -------- -------------- ---------------
Mr. John S. Szuch 1998 $198,000 $225,000 31,701 $37,616
Chairman and Chief 1997 188,000 195,000 2,500 34,315
Executive Officer 1996 175,000 168,300 2,500 33,345
Mr. Robert A. Sullivan 1998 $198,000 $225,000 31,701 $36,321
President and Chief 1997 188,000 195,000 2,500 33,112
Operating Officer 1996 175,000 168,300 2,500 32,289
Mr. Bruce K. Lee 1998 $136,000 $145,000 15,000 $21,200
Executive Vice President 1997 126,792 118,000 3,500 18,504
1996 116,600 95,000 1,500 17,104
Mr. Michael P. Killian 1998 $113,000 $75,000 13,167 $14,183
Senior Vice President 1997 108,000 59,000 1,000 12,606
1996 102,900 45,000 500 11,924
Mr. Stephen J. Kovatch 1998 $113,000 $65,000 15,667 $13,662
Senior Vice President 1997 108,000 54,000 1,000 12,400
1996 102,900 45,000 500 12,073
- --------------------------------------------------------------------------------------------------
(1) Represents total cash compensation earned, including amounts earned but
deferred at the election of these officers.
(2) Represents cash bonus awarded.
(3) Figures for 1998 represent:
Capital Bank, N.A. Retirement Savings Plan (Szuch, Lee, Killian and
Kovatch - $11,989, Sullivan - $11,195);
Capital Holdings, Inc. Supplemental Executive Retirement Plan
(Szuch - $20,347, Sullivan - $20,902, Lee - $9,211,
Killian - $2,194, Kovatch - $1,673);
Split dollar life insurance premiums (Szuch - $5,280, Sullivan - $4,224).
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1998 STOCK OPTION GRANTS TABLE
The following table sets forth stock options granted to the
Corporation's Chairman and Chief Executive Officer and the Corporation's four
other most highly compensated Executive Officers during 1998 under the
Corporation's Incentive Stock Option Plans. Under new Securities and Exchange
Commission regulations, companies are required to project an estimate of
appreciation of the underlying shares of stock during the option term. The
Corporation has elected to use the Black Scholes valuation model in the
presentation of option grant values presented below. In computing the option
values under the Black Scholes method, key assumptions included an estimated
volatility of 20%, an expected dividend yield of 2%, and a risk free interest
rate of 6% for options granted in May of 1998 and 4.6% for options granted in
January of 1999.
Individual Grants
- -----------------------------------------------------------------------------------------------------------
% of Total
Options Granted Exercise
Options to Employees Price(2)
Name Granted(1) in 1998 Per Share Expiration Date Option Value
---- ------- --------------- --------- --------------- ------------
John S. Szuch 8,400 7% $60.00 January 1, 2009 $128,184
John S. Szuch 23,301 20% 44.55 May 12, 2008 305,243
Robert A. Sullivan 8,400 7% 60.00 January 1, 2009 128,184
Robert A. Sullivan 23,301 20% 44.55 May 12, 2008 305,243
Bruce K. Lee 5,000 4% 60.00 January 1, 2009 76,300
Bruce K. Lee 10,000 9% 44.55 May 12, 2008 131,000
Michael P. Killian 1,750 2% 60.00 January 1, 2009 26,705
Michael P. Killian 11,417 10% 44.55 May 12, 2008 149,563
Stephen J. Kovatch 1,750 2% 60.00 January 1, 2009 26,705
Stephen J. Kovatch 13,917 12% 44.55 May 12, 2008 182,313
-------
107,236
(1) Options granted in 1998 are incentive stock options which are exercisable
after five years from the date of grant with full vesting occurring after
the fifth anniversary date; however, all options become immediately
exercisable in the event of a change in control of the Corporation. These
options were granted for a term of 10 years, subject to earlier termination
in certain events related to termination of employment.
(2) Exercise price is the fair market value on the date of grant.
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1998 STOCK OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth the number and value of all unexercised
stock options held by Executive Officers at year-end. The value of
"in-the-money" options refers to options having an exercise price which is less
than the market price of the Corporation's stock on December 31, 1998. On that
date, the Corporation's named Executive Officers held exercisable options which
were "in-the-money" as discussed in the following table. In addition, the table
sets forth the number of options exercised by each of the named Executive
Officers during 1998 and indicates the amount of value realized upon such
exercise.
Number (#) of Value ($) of
Unexercised Unexercised
Options- Options-
12/31/98 12/31/98(2)
-------------- --------------
Shares Acquired Net Value($) Exercisable/ Exercisable/
Name on Exercise Realized(1) Unexercisable Unexercisable
---- --------------- ------------ -------------- --------------
John S. Szuch 2,000 $61,120 0/39,351 $0/528,383
Robert A. Sullivan 2,250 68,760 0/39,351 0/528,383
Bruce K. Lee 0 0 1,973/22,152 84,108/320,998
Michael P. Killian 0 0 1,973/15,759 84,108/237,037
Stephen J. Kovatch 596 21,146 0/18,259 0/275,662
(1) Represents estimated market value of the Corporation's common stock at
exercise date, less the exercise price.
(2) Represents estimated market value of the Corporation's common stock at
December 31, 1998, less the exercise price.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Corporation has a funded, non-qualified supplemental executive
retirement plan (the "Supplemental Retirement Plan"), due to limitations imposed
by federal law on the amount of retirement income that may be paid through the
Corporation's Profit Sharing Plan. Under the Supplemental Retirement Plan, only
employees selected by the Compensation Committee and approved by the Board of
Directors are eligible to participate. As of the date of this proxy
participation in the Supplemental Retirement Plan is limited to Mr. Szuch, Mr.
Sullivan, Mr. Lee, Mr. Killian and Mr. Kovatch. Benefits under the Supplemental
Retirement Plan are funded annually and are held in an irrevocable trust for the
benefit of the participants. Payments under the Supplemental Retirement Plan
have no effect on the funding or availability of funds under the Corporation's
current Profit Sharing Plan nor on any future qualified plan. The following
Executive Officers participated in the Supplemental Retirement Plan in 1998: Mr.
Szuch ($20,347), Mr. Sullivan ($20,902), Mr. Lee ($9,211), Mr. Killian ($2,194)
and Mr. Kovatch ($1,673).
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REPORT OF THE COMPENSATION COMMITTEE OF CAPITAL HOLDINGS, INC. ON COMPENSATION
Under rules established by the Securities and Exchange Commission (the
"SEC"), the Corporation is required to provide certain data and information in
regard to the compensation and benefits provided to the Corporation's Chairman
of the Board, President and Chief Executive Officer and, if applicable, the four
other most highly compensated Executive Officers, whose compensation exceeded
$100,000 during the Corporation's fiscal year. The disclosure requirements, as
applied to the Corporation, include the Corporation's Chairman of the Board and
Chief Executive Officer (John S. Szuch), its President and Chief Operating
Officer (Robert A. Sullivan), its Executive Vice President (Bruce K. Lee) and
two of its Senior Vice Presidents, Mr. Michael P. Killian, and Mr. Stephen J.
Kovatch. The disclosure includes the use of tables and a report explaining the
rationale and considerations that led to fundamental executive compensation
decisions affecting such officers. Capital Holdings, Inc. is a holding company
and owns a single operating subsidiary, Capital Bank, N.A. Capital Holdings,
Inc. has no direct employees. All disclosures contained in this Proxy Statement
regarding executive compensation reflect compensation paid by Capital Bank, N.A.
The Compensation Committee of the Corporation has the responsibility of
determining the compensation policy and practices with respect to all Executive
Officers. At the direction of the Board of Directors, the Compensation Committee
has prepared the following report for inclusion in this Proxy Statement.
Compensation Philosophy. During 1998 the Compensation Committee
undertook a comprehensive review of the Corporation's compensation philosophy
for Executive Officers. As a result of this review the Compensation Committee
retained a compensation consulting firm to assist in the review of the
Corporation's compensation practices and to make recommendations to the
Compensation Committee regarding the level and method of delivery of
compensation to the Corporation's Executive Officers. In December of 1998 the
Compensation Committee recommended to the Corporation's Board of Directors the
adoption a compensation strategy for Executive Officers modeled on the key
aspects of the recommendation's received from the Corporation's compensation
consultants. This report reflects the Corporation's compensation philosophy as
endorsed by the Compensation Committee. The Compensation Committee makes a
recommendation regarding the level of compensation for Mr. Szuch and Mr.
Sullivan. The Compensation Committee determines the level of compensation for
all other Executive Officers within the constraints of the amounts approved by
the Board.
Essentially, the executive compensation program of the Corporation has
been designed to:
o Support a pay-for-performance policy that awards Executive
Officers for corporate performance. Compensation plans of the
Corporation should strive to be more objective than discretionary
while remaining flexible in order to adjust compensation of
non-financial aspects of executive officer performance.
o Provide a competitive base salary.
o Motivate key Executive Officers to achieve strategic business
goals, with appropriate compensation practices such as bonuses and
long term compensation components.
o Provide compensation opportunities which are comparable to those
offered by other peer group companies; thus allowing the
Corporation to compete for and retain
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talented executives who are critical to the Corporation's
long-term success. Generally, the Corporation strives to
compensate its Executive officers at an overall compensation
level commensurate with the 75th percentile of its peers.
Base Salary. Executive officer's salaries are determined by
evaluation of the responsibilities of their position and by comparing salaries
paid in the marketplace for executives with similar experience and
responsibilities. A comparison group of bank holding companies was established
based on one or more common traits with the Corporation, such as market
capitalization, asset size, geographic location, similar line of business and
financial returns on assets and equity. Individual salary increases are reviewed
annually and are based on the executive officers performances and the
Corporation's overall earnings during the preceding year, and are generally
targeted to be at the median of the peer group.
Cash Bonus Plan. The Corporation maintains a cash bonus plan
(the "Bonus Plan") which allocates a portion of each executive officers
compensation to cash bonus paid annually. The Corporation targets to pay its
executive officers at the 75th percentile of its peers with base salary targeted
to the median of such peers and the balance paid in cash bonus and long term
compensation. The allocation between cash bonus and long term compensation is
generally targeted to be equal for the Corporation's Chairman and CEO (Mr.
Szuch) and President and COO (Mr. Sullivan) while slightly weighted toward cash
bonus amongst other executive officers. The award of a bonus to any employee
under the terms of the Bonus Plan is discretionary and in the case of Messrs.
Szuch and Sullivan is determined by the Board of Directors upon the
recommendation of the Compensation Committee, and in all other cases is
determined by the Compensation Committee upon recommendation of management.
Long-Term Compensation. Long-term incentive compensation is
addressed by the Corporation's Incentive Stock Option Plan and the Nonemployee
Director Stock Option Plan. These option plans are designed to provide long-term
incentive to the executive officers and directors of the Corporation, and to
better align the interest of management with those of the Corporation's
shareholders. The Board generally believes that stock options provide an
effective means of accomplishing its long-term compensation objectives, as the
level of compensation is directly proportional to the level of appreciation in
the market value of the Corporation's common stock subsequent to the date of the
option grant.
CHIEF EXECUTIVE OFFICER'S AND CHIEF OPERATING OFFICER'S COMPENSATION
The Compensation Committee considered the following factors in
determining the base salary for 1999 for Mr. John S. Szuch, Chairman and CEO and
Mr. Robert A. Sullivan, President and COO. The Compensation Committee has
determined that while the job duties and responsibilities of Mr. Szuch and Mr.
Sullivan are different, the relative contribution to attaining the Corporation's
profitability objectives of each such officer is substantially similar.
Therefore, the Compensation Committee has recommended and the Board of Directors
has approved equal compensation for the Chairman & CEO and President & COO. In
determining the level of
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compensation to be paid to Mr. Szuch and Mr. Sullivan the Compensation Committee
and the Board took into account comparative data for comparable bank holding
companies. Based upon these factors, the Compensation Committee increased the
base pay of Mr. Szuch and Sullivan effective January 1, 1999. In addition, the
Compensation Committee approved a cash bonus to each of Mr. Szuch and Mr.
Sullivan in December of 1998 based upon the specific measurable and subjective
performance goals. The measurable performance goal was the attainment of the
1998 profit plan. The Compensation Committee also considered certain subjective
criteria such as the attainment of superior growth, and the development of key
personnel. The Compensation Committee also awarded options to Mr. Szuch and Mr.
Sullivan during 1998 under the Corporation's option plan incident to the
Corporation's long term performance compensation objectives.
Company's Position on Compliance with Section 162(m) of the Internal
Revenue Code. Section 162(m) of the Internal Revenue Code (the "Code") limits
the deduction allowable for federal income tax purposes to the Corporation for
compensation paid to the Chief Executive Officer and each of the four other most
highly compensated executive officers in any year to $1 million, excluding
qualified performance-based compensation. The Committee will continue to work to
structure components of its executive compensation package to achieve maximum
deductibility under Section 162(m), while at the same time considering the goals
of its executive compensation philosophy.
THIS REPORT ON COMPENSATION IS SUBMITTED BY THE COMPENSATION COMMITTEE MEMBERS:
George A. Isaac, III, Chairman James D. Sayre
Joel A. Levine Robert A. Sullivan
Thomas W. Noe John S. Szuch
Noel S. Romanoff
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
John S. Szuch, the Corporation's Chairman of the Board and Chief
Executive Officer, and Robert A. Sullivan, the Corporation's President and Chief
Operating Officer, served on the Compensation Committee of the Corporation,
which is responsible for compensation matters (see "Report of the Compensation
Committee of Capital Holdings, Inc. on Compensation" in this Proxy Statement).
Although Messrs. Szuch and Sullivan served on the Compensation
Committee, they did not participate in any decisions regarding their own
compensation as an Executive Officer. Each year, the Compensation Committee
recommends the amount of the bonus award for Messrs. Szuch and Sullivan
(pursuant to the Cash Bonus Plan described elsewhere in this Proxy Statement)
and salary for the ensuing year. Neither Mr. Szuch nor Mr. Sullivan participated
in discussions nor decision-making relative to their own nor each other's
compensation.
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PERFORMANCE GRAPH - FIVE-YEAR SHAREHOLDER RETURN COMPARISON
The SEC requires that the Corporation include in this Proxy Statement a
line-graph presentation comparing cumulative five-year shareholder returns on an
indexed basis with a broad equity market index and either a nationally
recognized industry standard or an index of peer companies selected by the
Corporation. The Corporation has selected the Dow Jones Equity Market Index and
the Dow Jones Regional Bank Index for purposes of this performance comparison.
The chart below compares the value of $100 invested on December 31, 1993, in the
Corporation's stock, the Dow Jones Equity Market Index and the Dow Jones
Regional Bank Index.
*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
- ------------------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
CAPITAL HOLDINGS, INC. $100.00 $114.07 $135.89 $170.15 $215.71 $279.78
DOW JONES EQUITY MARKET INDEX $100.00 $100.74 $138.69 $170.63 $228.57 $294.05
DOW JONES REGIONAL BANK INDEX $100.00 $ 96.24 $153.91 $211.43 $330.28 $371.17
- ------------------------------------------------------------------------------------------------------------------------
ASSUMES $100 INVESTED ON DECEMBER 31, 1993 IN CAPITAL HOLDINGS, INC. COMMON
STOCK, DOW JONES EQUITY MARKET INDEX & DOW JONES MAJOR REGIONAL BANK INDEX
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PROPOSAL #2 TO AMEND ARTICLE FOURTH OF AMENDED ARTICLES OF INCORPORATION AND TO
EFFECT A 3:1 STOCK SPLIT
The Board of Directors recommends the amendment of Article Fourth of
the Corporation's Amended Articles of Incorporation in the manner shown in Annex
1 hereto. The proposed Amendment to Article Fourth would change the number of
authorized shares of the Corporation's Common Stock from three million
(3,000,000) shares to twenty million (20,000,000) shares. This change would be
effective upon the date of filing of the Amendment to the Amended Articles with
the Secretary of State of the State of Ohio. In addition, adoption of Proposal
#2 would effect a 3:1 stock split to all shareholders of record on June 30,
1999.
The Board of Directors believes that it is in the best interest of the
Corporation and its Shareholders that the Corporation have a sufficient number
of authorized but unissued shares available for possible use in future
acquisition and expansion opportunities that may arise, for general corporate
needs such as future stock dividends or stock splits, and for other proper
purposes within the limitations of the law. The Corporation has no current plans
to use its authorized but unissued shares of Common Stock without par value for
any particular purpose. Such shares would be available for issuance without
further action by the Shareholders, except as otherwise limited by applicable
law. Among other requirements, Ohio law provides that in connection with a
merger or consolidation, issuance of shares that constitute one-sixth or more of
the Corporation's voting power in the election of directors would require
further Shareholder approval. The current proposal does not constitute such
approval, and the Corporation would seek special approval of any merger that
would trigger this provision of Ohio law.
If additional shares of Common Stock are issued by the Corporation, it
may potentially have an anti-takeover effect by making it more difficult to
obtain Shareholder approval of various actions, such as a merger or removal of
management. Additionally, the issuance of additional shares of Common Stock may,
among other things, have a dilutive effect on earnings per share and on the
equity and voting power of existing Shareholders. The terms of any Common Stock
issuance which will be determined by the Corporation's Board of Directors, will
depend upon the reason for issuance and will be dependent largely on market
conditions and other factors existing at the time. The increase in authorized
shares of Common Stock has not been proposed in connection with any
anti-takeover related purpose and the Board of Directors and management have no
knowledge of any current efforts by any one to obtain control of the Corporation
or to effect large accumulations of the Corporation's Common Stock.
Under the Corporation's Articles of Incorporation, the shareholders of
the Corporation have no preemptive rights to subscribe to or purchase any shares
of Common Stock or other securities of the Corporation. Shareholders should also
note that issuance of additional shares of capital stock would dilute the
voting, dividend, liquidation and other rights of the capital stock presently
outstanding.
The resolutions attached to this Proxy Statement as Annex 1 will be
submitted for adoption at the Annual Meeting. The affirmative vote of the
holders of shares of the Common Stock, without par value, of the Corporation
entitling them to exercise a majority of the voting
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power of such shares is necessary to adopt the proposed amendment. Proxies will
be voted in favor of the resolutions unless otherwise instructed by the
Shareholder. Abstentions and shares not voted by brokers and other entities
holding shares on behalf of the beneficial owners will have the same effect as
votes cost against the Amendment. The Board of Directors recommends adoption of
the resolutions. If sufficient votes are received, Proposal 2 will be adopted,
the amendment to the Corporation's Articles of Incorporation to increase the
number of authorized shares will become effective upon filing of the Articles of
Amendment with the Secretary of State of the State of Ohio and the 3:1 stock
split will become effective on June 30, 1999.
THE DIRECTORS UNANIMOUSLY RECOMMEND A VOTE IN FAVOR OF THIS PROPOSAL #2.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors of the Corporation and their associates were customers of,
and have had transactions with, the Corporation in the ordinary course of
business during 1998.
These transactions consisted of extensions of credit by the Corporation
in the ordinary course of business and were made on substantially the same terms
as those prevailing at the time for comparable transactions with other persons.
In the opinion of the management of the Corporation, those transactions do not
involve more than a normal risk of being collectible or present other
unfavorable features. The Corporation expects to have, in the future, banking
transactions in the ordinary course of its business with Directors and their
associates on the same terms, including interest rates and collateral on loans,
as those prevailing at the time of comparable transactions with others.
Director Levine is of counsel to Spengler Nathanson, a law firm which
performed services for the Corporation during 1998, and is expected to continue
to provide services to the Corporation in the future.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and Directors, and persons who own more than ten percent
of a registered class of the Corporation's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, Directors and greater than ten percent shareholders are required by
SEC regulation to furnish the Corporation with copies of all Section 16(a) forms
they file.
Based solely on review of the copies of such forms furnished to the
Corporation or written representations that no Form 5s were required, the
Corporation believes that during 1998 all Section 16(a) filing requirements
applicable to its officers and Directors were complied with, except for the late
reporting of a single transaction, on a Form 4, by each of Isaac, Langenderfer,
Landin, Lee, Lyden and Sayre due to an oversight by the Corporation's counsel in
the preparation of the required Form 4's. The Corporation has no shareholders
who are ten percent beneficial owners.
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SELECTION OF AUDITORS
Ernst & Young LLP has been appointed to serve as the Independent
Auditor for the Corporation and its subsidiary for the fiscal year ended
December 31, 1998. It is the intention of the Corporation to appoint Ernst &
Young LLP as Independent Auditor for 1999. Representatives of Ernst & Young LLP
are expected to be present at the Annual Meeting to respond to appropriate
questions from shareholders and to have the opportunity to make any statements
they consider appropriate.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
If any shareholder of the Corporation wishes to submit a proposal to be
included in next year's Proxy Statement and acted upon at the annual meeting of
the Corporation to be held in 2000, the proposal must be received by the
Secretary of the Corporation at the principal executive offices of the
Corporation, 5520 Monroe Street, Sylvania, Ohio, 43560, prior to the close of
business on December 23, 1999. On any other proposal raised by a shareholder for
next year's annual meeting, the Corporation intends that proxies received by it
will be voted in the interest of the Corporation in accordance with the judgment
of the persons named in the proxy and the proposal will be considered untimely,
unless notice of the proposal is received by the Corporation not later than
February 21, 2000.
The Corporation's Code of Regulations establish advance notice
procedures as to the nomination, other than by or at the direction of the Board
of Directors, of candidates for election as directors. In order to make a
director nomination at a shareholder meeting, it is necessary that you notify
the Corporation not fewer than 14 days in advance of the meeting unless the
Corporation provides shareholders less than 21 days notice of the meeting, and
then notice of the nominations must be given not later than the seventh day
after the notice of the meeting was mailed. In addition, the notice must meet
all other requirements contained in our Code of Regulations. Any shareholder who
wishes to take such action should obtain a copy of the Code of Regulations and
may do so by written request addressed to the Secretary of the Corporation at
the principal executive offices of the Corporation.
OTHER MATTERS
The Board of Directors of the Corporation is not aware of any other
matters that may come before the meeting. However, the enclosed Proxy will
confer discretionary authority with respect to matters which are not known to
the Board of Directors at the time of printing hereof and which may properly
come before the meeting. A copy of the Corporation's 1998 report filed with the
Securities and Exchange Commission, on Form 10-K, will be available without
charge to shareholders on request. Address all requests, in writing, for this
document to Michael P. Killian, Senior Vice President, Capital Holdings, Inc.,
5520 Monroe Street, Sylvania, Ohio 43560.
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ANNEX 1
PROPOSED AMENDMENT TO ARTICLE FOURTH
OF AMENDED ARTICLES OF INCORPORATION
RESOLVED, that Article Fourth of the Amended Articles of Incorporation
of Capital Holdings, Inc. be, and they hereby are, amended in their entirety to
read as follows:
FOURTH: The maximum number of Common Shares which the Corporation is
authorized to have outstanding is Twenty Million (20,000,000) shares,
no par value.
RESOLVED, FURTHER, that all of the Corporation's outstanding shares of
no par value common stock be split and converted into three shares of the
Corporation's no par value common as of June 30, 1999; and
RESOLVED, FURTHER, that the proper officers of the Corporation be and
hereby are authorized and directed to take all actions, execute all instruments,
and make all payments which are necessary or desirable, in their discretion, to
make effective the foregoing amendment to the Amended Articles of Incorporation
of the Corporation, including, without limitation, filing a certificate of such
amendment with the Secretary of State of the State of Ohio.
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OFFICIAL PROXY
THIS PROXY IS SOLICITED BY MANAGEMENT AND UNLESS OTHERWISE MARKED, WILL BE VOTED
FOR THE PROPOSALS.
Be it known, that John S. Szuch and Robert A. Sullivan, or either of them, are
appointed attorneys or attorney, with full power of substitution, including the
right to vote cumulatively for and in the name of the undersigned, all shares of
stock of Capital Holdings, Inc. which the undersigned is entitled to vote at the
Annual Meeting of the Stockholders of said company scheduled to be held at 6:30
p.m., May 5, 1999, at FRANCISCAN CENTER, LOURDES COLLEGE, Sylvania, Ohio 43560,
or at any adjournment of recess thereof, such proxies being directed to vote as
specified below and being authorized to vote in their discretion on any matter
to come before the meeting and as to which a specified vote is not requested.
PROPOSAL 1. TO RE-ELECT THE FOLLOWING DIRECTORS TO SERVE FOR THE TERM INDICATED.
PLEASE MARK AN "X" IN THE APPROPRIATE BOX. MANAGEMENT RECOMMENDS A "FOR" VOTE ON
THE PROPOSAL.
[ ] FOR [ ] WITHHOLD AUTHORITY
To vote for all nominees listed below
CLASS TERM EXPIRES
- ----- ------------
Class III 2002
1. George A. Isaac, III NOTE: Directors Appold, Bennett, Feniger, Kripke and Noe are
2. Bruce K. Lee members of Class I whose terms will expire in 2000. Directors
3. W. Geoffrey Lyden, III Landin, Langenderfer, Levine, Romanoff, Savage and Sullivan
4. James D. Sayre are members of Class II whose terms will expire in 2001.
5. John S. Szuch
To withhold authority to vote for any individual nominee, write that name on the
line.
PROPOSAL 2. TO APPROVE THE AMENDMENT TO THE ARTICLE FOURTH OF THE CORPORATION'S
ARTICLES OF INCORPORATION TO INCREASE THE TOTAL NUMBER OF THE CORPORATION'S
AUTHORIZED NO PAR VALUE COMMON SHARES FROM 3,000,000 TO 20,000,000 AND TO EFFECT
A THREE FOR ONE STOCK SPLIT.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
----------------------------------------------------------------------
PROPOSAL 3. TO TRANSACT SUCH BUSINESS AS MAY LAWFULLY COME BEFORE THE
STOCKHOLDERS AT SUCH ANNUAL MEETING.
If the above ballot is not marked, such proxies are authorized to vote the
shares represented by this Proxy in accordance with their discretion.
ALL FORMER PROXIES ARE HEREBY REVOKED Number of shares:
----------------
Date Signed:
- ------------------------------------- ---------------------
Titling of Stock
- ------------------------------------- ---------------------------------
Signature of Stockholder Signature of Stockholder
(All joint owners should sign. When signing in fiduciary capacity or as a
corporate officer, please give your full title as such.)