SCHEDULE 14A
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 the Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-ll(c) or Section 240.14a-12
CAPITAL FACTORS HOLDING, INC.
(Name of Registrant as Specified In Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement if other than 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)(4) 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:
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:
<PAGE>
[CAPITAL FACTORS HOLDING, INC. LOGO]
120 East Palmetto Park Road, 5th Floor
Boca Raton, Florida 33432
--------------
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, MAY 22, 1998
--------------
To the Shareholders of Capital Factors Holding, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of Capital Factors Holding, Inc. (the "Company") will be
held at the Boca Raton Resort & Club, 501 East Camino Real, Boca Raton, Florida,
33431, on Friday, May 22, 1998, at 10:00 a.m., for the following purposes:
(1) To elect twelve persons to the Company's Board of Directors to
hold office until their terms shall expire or until their
successors are duly elected and qualified; and
(2) To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
The Board of Directors has fixed the close of business on April 6, 1998
as the record date for the determination of the shareholders entitled to notice
of and to vote at the Annual Meeting and any adjournments or postponements
thereof.
Whether or not you expect to be present at the Annual Meeting, please
sign, date and return the enclosed proxy card as promptly as possible in the
enclosed pre-addressed stamped envelope.
By Order of the Board of Directors
TIMOTHY E. KISH
Secretary
Miami, Florida
April 27, 1998
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND
THE ANNUAL MEETING IN PERSON. THOSE SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE
RESPECTFULLY URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE. SHAREHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE
ANNUAL MEETING, REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
<PAGE>
CAPITAL FACTORS HOLDING, INC.
-------------
PROXY STATEMENT
FOR THE MAY 22, 1998 ANNUAL MEETING OF SHAREHOLDERS
-------------
This Proxy Statement is furnished to shareholders of Capital Factors
Holding, Inc., a Florida corporation (the "Company"), in connection with the
solicitation by the Company's Board of Directors of proxies for the Annual
Meeting of Shareholders to be held on Friday, May 22, 1998, and any adjournments
or postponements thereof (the "Annual Meeting"), pursuant to the enclosed Notice
of Annual Meeting. The approximate date of mailing this Proxy Statement and the
accompanying proxy to the Company's shareholders is April 27, 1998. The complete
mailing address, including zip code, of the Company is 120 East Palmetto Park
Road, 5th Floor, Boca Raton, Florida 33432; telephone number: (561) 368-5011.
USE OF PROXIES AT THE ANNUAL MEETING
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. Proxies in the accompanying form, if properly executed, received by
the Company prior to the Annual Meeting and not revoked prior to the use
thereof, will be voted at the Annual Meeting as instructed thereon. Executed
proxies with no instructions indicated thereon that have not been revoked will
be voted:
(i) for the election of twelve directors, as set forth below under
"Election of Directors;" and
(ii) to transact such other business as may properly come before
the Annual Meeting, including any adjournments or
postponements thereof.
The Board of Directors knows of no matters that are to be presented for
consideration at the Annual Meeting other than those described in this Proxy
Statement, but if other matters are properly presented, it is the intention of
the persons designated as proxies in the enclosed form of proxy to vote as
proxies with respect to such matters in accordance with their judgment.
REVOCATION OF PROXIES
The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation of duly executed
proxy bearing a later date. No revocation will be effective, however, until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING
Holders of the Company's Common Stock of record on the books of the
Company as of the close of business on April 6, 1998 (the "Record Date") will be
entitled to notice of and to vote at the Annual Meeting and any adjournments or
postponements thereof. At the Record Date, there were 12,304,150 shares of
Common Stock outstanding. Holders of Common Stock will vote together as a single
class on all matters submitted to the shareholders for a vote at the Annual
Meeting, with each share of Common Stock entitled to one vote on each matter
presented.
<PAGE>
QUORUM; ADJOURNMENT; VOTE REQUIRED FOR APPROVAL
As set forth in the Bylaws of the Company, the attendance, in person or
by proxy, of the holders of a majority of the outstanding shares of Common Stock
entitled to vote at the Annual Meeting is necessary to constitute a quorum for
the transaction of business at the Annual Meeting. If less than a majority of
the outstanding shares of Common Stock are represented at the Annual Meeting, a
majority of the shares so represented may adjourn the meeting from time to time
without further notice until a quorum is obtained.
In order to be elected, nominees for director must receive a plurality
of the votes cast by holders of shares of Common Stock voting in person or by
proxy at the Annual Meeting. Union Planters Bank of Florida (formerly known as
Capital Bank), the holder of approximately 81% of all issued and outstanding
shares of the Company's Common Stock, has advised the Company that it intends to
vote such shares in favor of all nominees for director. Accordingly, all
nominees for director will be elected notwithstanding the vote of any other
shareholders.
Abstentions are considered as shares present and entitled to vote for
purposes of determining the presence of a quorum and will be counted as votes
cast for purposes of determining the outcome of any matter submitted to the
shareholders for a vote, but are not counted as votes cast "for" or "against"
any matter. The inspector of elections will treat shares referred to as "broker
or nominee non-votes" (shares held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote and the broker or nominee does not have discretionary voting
power on a particular matter) as shares that are present and entitled to vote
for purposes of determining the presence of a quorum. Abstentions and broker or
nominee non-votes will have no effect for purposes of determining the outcome of
the election of any director.
SOLICITATION
The Company will bear the cost of preparing, assembling and mailing
this Proxy Statement, the Notice of Annual Meeting of Shareholders and the
enclosed proxy. In addition to the use of the U.S. mail, directors, officers and
regular employees of the Company or its subsidiaries may solicit proxies
personally or by telephone, facsimile or telegram. They will receive no
compensation therefor in addition to their regular salaries. The Company will
reimburse banks, custodians, brokerage houses, nominees and other fiduciaries
for their reasonable expenses in sending the proxy materials to their
principals.
Copies of the Company's Annual Report, including consolidated financial
statements for the year ended December 31, 1997 are being mailed to shareholders
with this Proxy Statement.
MERGER OF CAPITAL BANCORP
Union Planters Bank of Florida (formerly known as Capital Bank) owns
approximately 81% of the outstanding Common Stock of the Company. On December
31, 1997, Capital Bancorp, the former parent corporation of Capital Bank, merged
with and into a subsidiary of Union Planters Corporation, a Tennessee
corporation. Each share of Common Stock of Capital Bancorp was exchanged for
.8525 shares of common stock of Union Planters Corporation. Capital Bank, which
in January 1998 changed its name to Union Planters Bank of Florida, is now the
indirect wholly owned subsidiary of Union Planters Corporation.
2
<PAGE>
ELECTION OF DIRECTORS
It is intended that the shares shown on the enclosed proxy, if returned
properly executed, will be voted for the election of the twelve nominees for
director named below, unless the proxy is marked to indicate that such
authorization is expressly withheld. Each nominee elected will serve until the
next annual meeting of shareholders and until his or her successor has been duly
elected and qualified. Each of the nominees for director has consented to being
named as a nominee in this Proxy Statement and to serve if elected. If, however,
any nominee becomes unavailable for any reason or if a vacancy occurs before the
election, which event is not now anticipated, at the discretion of the proxies,
the shares as to which a proxy has been granted will be voted for such
substitute nominee or nominees as may be selected by the Board of Directors of
the Company.
NOMINEES
The following table contains information with respect to each nominee
for director. Each nominee is currently a director of the Company and Capital
Factors, Inc., the Company's wholly owned subsidiary ("Capital Factors"). The
table describes the periods each nominee has served as director of the Company
or, if before 1994 (the year in which the Company became the parent company for
Capital Factors), of Capital Factors; his or her positions and offices, if any,
with the Company and Capital Factors; and his or her principal occupation or
employment for the past five years.
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION, DIRECTOR
DIRECTORSHIP AND BUSINESS EXPERIENCE (1) SINCE
------------------------------------------------------------------------------- --------
<S> <C>
STEPHEN N. ASHMAN: AGE 49 1985
Director (May 1985 to present) of Capital Factors; Chief Executive
Officer and President (November 1991 to present) of Capital Bank, N.A.,
a national banking association located in Rockville, Maryland; Chief
Financial Officer and Treasurer (February 1985 to November 1991) of
Capital Bancorp; Executive Vice President and Chief Financial Officer
(February 1985 to November 1991) of Capital Bank.
RONALD S. CHASE: AGE 54 1992
Director (September 1992 to present) of Capital Factors; Director (July
1993 to present) of Union Planters Bank of Florida; President and Owner
of Chase Holdings & Advisory Services, Inc. (June 1991 to present), a
company which provides financial advisory services to corporations and
litigation attorneys; President and Owner of RSC Development, Inc.
(November 1993 to present), a residential developer; President and
Owner of CFAT H20, Inc. (November 1993 to present), a water treatment
facility; Partner (July 1965 to May 1991) of Deloitte & Touche, LLP;
Founding Director (1985 to present) of Greater Miami Neighborhood,
Inc., a not-for-profit affordable housing developer.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION, DIRECTOR
DIRECTORSHIP AND BUSINESS EXPERIENCE (1) SINCE
------------------------------------------------------------------------------- --------
<S> <C>
CYNTHIA R. COHEN: AGE 45 1996
Director (July 1996 to present) of Capital Factors; President (June
1990 to present) of Marketplace 2000, a marketing and strategy
consulting firm; Partner (August 1987 to May 1990) of Deloitte &
Touche, LLP; Director (1994 to present) of Office Depot, Inc., a retail
office products company; Director (1993 to present) of Loehmann's
Holdings, Inc., a retail clothing company; Director (1993 to present)
of One Price Clothing, Inc., a retail clothing company.
NORMAN G. EINSPRUCH: AGE 65 1996
Director (July 1996 to present) of Capital Factors; Professor (August
1977 to present) and Chairman (June 1994 to present) of the Department
of Industrial Engineering at the University of Miami; Director (May
1981 to present) of Ogden Corporation, an energy, aviation and
entertainment company.
DANIEL M. HOLTZ: AGE 38 (2) 1985-
Director (1985 to 1987, June 1993 to present) of Capital Factors; 1987,
Director and 1987, Managing Principal (January 1998 to present) of 1993
Walden Capital Corporation, an 1993 investment and financial advisory to
firm; Chairman of the Board (October 1994 to to December 1997), Chief present
Executive Officer (October 1994 to December 1997) and present President
(February 1994 to December 1997) of Capital Bancorp; Chairman of the
Board (October 1994 to December 1997), Chief Executive Officer (October
1994 to December 1997) and President (October 1991 to December 1997) of
Union Planters Bank of Florida; Director (July 1985 to June 1993) and
President (September 1987 to November 1991) of Capital Bank of
California, which was declared insolvent and closed by the California
Superintendent of Banks in June 1993.
JAVIER J. HOLTZ: AGE 37 (2) 1987
Chairman of the Board (October 1994 to present) and Executive Vice
President (November 1994 to present) of the Company; Chairman of the
Board (October 1994 to present) and Executive Vice President (November
1994 to present) of Capital Factors; Senior Vice President (January
1990 to December 1997) of Capital Bancorp; Director (July 1988 to
present) and Executive Vice President (September 1994 to present) of
Union Planters Bank of Florida; Chairman of the Board (October 1994 to
February 1998) and Director (October 1994 to present) of Capital Bank,
N.A., a national banking association located in Rockville, Maryland.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION, DIRECTOR
DIRECTORSHIP AND BUSINESS EXPERIENCE (1) SINCE
------------------------------------------------------------------------------- --------
<S> <C>
JOHN W. KIEFER: AGE 51 1987
Chief Executive Officer and President (April 1994 to present) of the
Company; Director, Chief Executive Officer and President (April 1987 to
present) of Capital Factors; Senior Vice President of Capital Bancorp
(January 1987 to December 1997); Director of Union Planters Bank of
Florida (October 1992 to present).
JACK D. LISTANOWSKY: AGE 50 1993
Director (November 1993 to present) of Capital Factors; Vice
President-Chief Sourcing and Production Officer (April 1995 to present)
of The Limited, Inc., a clothing retailer; Executive Vice President of
Manufacturing and Operations (December 1981 to April 1995) of Liz
Claiborne, Inc., a clothing manufacturer.
JACKSON W. MOORE: AGE 49 1998
Director (April 1998 to present) of Capital Factors; Director (October
1986 to present), President (April 1989 to present) and Chief Operating
Officer (April 1994 to present) of Union Planters Corporation and Union
Planters Bank, N.A., a national banking association and its holding
company located in Memphis, Tennessee; Director (January 1977 to
present) of Peoples Savings Bank, a savings and loan association
located in Clanton, Alabama.
HAROLD L. OSHRY: AGE 75 1992
Director of Capital Factors (September 1992 to present); Chairman of
the Board (1953 to present) of Universal Ford, Inc., an automobile
retailer; President (1986 to present) of 5-0 Associates, a real estate
development company; Chairman, President and Chief Executive Officer
(1955 to 1985) of Sandgate Corp, a motor vehicle leasing company.
BRUCE S. RAIFFE: AGE 40 1993
Director (September 1993 to present) of Capital Factors; President
(March 1993 to present) and Executive Vice President (October 1986 to
March 1993 ) of Gund, Inc., a toy manufacturer; Director (June 1977 to
present) of the United Cerebral Palsy Association.
BENJAMIN W. RAWLINS, JR.: AGE 60 1998
Director (April 1998 to present) of Capital Factors; Chairman of the
Board (April 1989 to present) and Chief Executive Officer (September
1984 to present) of Union Planters Corporation and Union Planters Bank,
N.A., a national banking association and its holding company located in
Memphis, Tennessee.
</TABLE>
(Footnotes on following page.)
5
<PAGE>
(1) Capital Factors is a wholly owned subsidiary of the Company. Union
Planters Bank of Florida is the principal shareholder of the Company
and owns approximately 81% of the outstanding Common Stock. Prior to
January 1, 1998, Union Planters Bank of Florida was known as Capital
Bank and was the wholly-owned subsidiary of Capital Bancorp. Union
Planters Corporation is the indirect parent company of Union Planters
Bank of Florida. See "Executive Compensation -- Compensation Committee
Interlocks and Insider Participation" and "Executive Compensation --
Certain Relationships and Related Transactions" for more information
regarding the relationship between the Company and Union Planters Bank
of Florida.
(2) Daniel Holtz and Javier Holtz are brothers. In 1996, Daniel Holtz and
Javier Holtz, along with another family member, filed an application
with the Florida Department of Banking and Finance to acquire and/or
maintain control of Capital Bank through their ownership of
approximately 45% of the outstanding shares of Capital Bancorp, the
former parent company of Capital Bank. On June 16, 1997, the
application was denied and the Florida Comptroller issued an order
requiring the Holtzes to divest their control of Capital Bancorp. On
December 31, 1997, Capital Bancorp merged with and into a subsidiary of
Union Planters Corporation and, as a result, the Holtzes are no longer
controlling shareholders of Capital Bank, which changed its name to
Union Planters Bank of Florida in the first quarter of 1998.
*****
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Ronald S. Chase, Cynthia R. Cohen, Norman G. Einspruch and Bruce S.
Raiffe currently serve as members of the Company's Audit Committee. The Audit
Committee's functions include recommending to the Board of Directors the
engagement of the Company's independent certified public accountants, reviewing
with such accountants the plan and results of their audit of the financial
statements and reviewing the Company's significant accounting policies and
internal controls. The Audit Committee meets approximately once every quarter
and held five meetings in 1997.
In addition, Mr. Chase, Ms. Cohen, Jack D. Listanowsky and Harold L.
Oshry serve on the Company's Compensation Committee, which has final approval
authority with respect to compensation paid to the Chief Executive Officer and
also makes recommendations to the Board for the compensation to be paid to the
other executive officers of the Company and Capital Factors. The Compensation
Committee is also responsible for the grant of options under the Capital Factors
Holding, Inc. Stock Option Plan. Dr. Einspruch, Mr. Listanowsky, Mr. Oshry and
Mr. Raiffe also serve on the Company's Conflict of Interest Committee, which,
among other things, reviews and makes recommendations with respect to
transactions between the Company and any of its affiliates, including those with
Union Planters Bank of Florida, which as of the Record Date owned approximately
81% of the outstanding Common Stock of the Company, and Union Planters Bank of
Florida's ultimate parent company, Union Planters Corporation. The Compensation
Committee meets on an as needed basis and held three meetings in 1997. The
Conflict of Interest Committee also meets on an as needed basis and held three
meetings in 1997.
Every member of the Company's Board of Directors serves as a member of
the Credit Committee, which meets at least quarterly and reviews new factoring
clients and monitors current accounts. The Credit Committee held four meetings
in 1997. The Company does not have a standing nominating committee; instead, the
Board as a whole selects its nominees for election as directors.
The Company's Board of Directors held eight meetings and Capital
Factors' Board of Directors held 13 meetings during 1997. During 1997, each
director attended at least 75% of the aggregate of all meetings of both the
Company's and Capital Factors' boards of directors and all meetings of the
committees on which he or she served, except Jack D. Listanowsky and Harold L.
Oshry.
6
<PAGE>
COMPENSATION OF DIRECTORS
The Company does not pay any directors' fees, however, Capital Factors
pays all directors a monthly retainer of $1,000 and $250 for each meeting
attended by the director. Capital Factors also reimburses all directors for any
travel-related expenses incurred in connection with their activities as
directors. Non-employee directors who are members of a Board committee receive
an additional fee per meeting of the applicable committee of $400 for service on
those committees. Employee directors who are members of the committees do not
receive additional compensation for their service on the committees.
In addition, pursuant to the Capital Factors Holding, Inc. Stock Option
Plan, each non-employee director received options to purchase 2,000 shares of
Common Stock on May 23, 1997. Pursuant to such plan, each non-employee director
is also entitled to receive, on an annual basis, options to purchase an
additional 2,000 shares of Common Stock on the date of each annual meeting of
shareholders of the Company, if such person continues to serve as a director of
the Company on such date.
7
<PAGE>
EXECUTIVE COMPENSATION
ANNUAL COMPENSATION
The following table sets forth the aggregate compensation earned for
services rendered in all capacities to the Company and Capital Factors during
the years ended December 31, 1995, 1996 and 1997 by the Chief Executive Officer
and the four most highly compensated executive officers of the Company and
Capital Factors, other than the Chief Executive Officer, whose aggregate
remuneration exceeded $100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------ ------------
NUMBER OF
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND COMPENSATION OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) SARS(#)(2) ($)
- ----------------------------- ---- ---------- --------- ------ ---------- ---
<S> <C> <C> <C> <C> <C> <C>
JOHN W. KIEFER 1997 325,000 353,381(3) 15,000(4) 24,000 51,460(5)
Chief Executive Officer 1996 300,000 372,835 14,750 120,000 300,168
and President 1995 275,000 300,000 14,850 -- 350,168
STEPHEN J. DONOHUE 1997 255,000 320,736 -- 12,000 55,153(6)
Executive Vice 1996 232,000 283,073 -- 60,000 354,784
President - NY 1995 210,000 262,171 -- -- 54,784
Regional Manager
JAMES L. MORRISON 1997 210,000 301,936(3) -- 12,000 53,553(7)
Executive Vice 1996 189,000 212,796 -- 60,000 273,588
President - CA 1995 171,000 162,490 -- -- 53,588
Regional Manager
MICHAEL J. SULLIVAN 1997 181,500 85,000 -- 4,000 69,452(9)
Senior Vice 1996 165,000 85,000 -- 20,000 --
President - NC 1995 125,577(8) 70,000 -- -- --
Regional Manager
DENNIS A. MCDERMOTT 1997 130,000 85,000 -- 10,000 48,766(10)
Executive Vice 1996 112,000 75,000 -- 40,000 1,120
President and Chief 1995 100,000 60,000 -- -- 1,000
Financial Officer
</TABLE>
- ----------
(1) The Company and its subsidiaries provide automobiles and certain other
benefits for each Named Executive Officer. After reasonable inquiry,
management has determined that the aggregate amount of perquisites and
other personal benefits provided to each Named Executive Officer does not
total the lesser of $50,000 or 10% of his total annual salary and bonus.
(2) The Company has not granted any freestanding SARs. For more information
regarding the SARs attached to certain of the option grants, see
"Compensation Pursuant to Plans -- Terms of Options" below.
(3) Includes a cash bonus of $28,381 and $37,568 equal to the amount of
principal and interest which was due as of December 31, 1997 on the loans
made to Mr. Kiefer and Mr. Morrison, respectively, by the Company
pursuant to the terms of their employment agreements.
(Footnotes continued on following page.)
8
<PAGE>
(4) Represents directors' fees paid to Mr. Kiefer for his service as a
director of the Company and Capital Factors.
(5) Represents (i) $49,860 in premiums paid in 1997 for supplemental life
insurance benefits on behalf of Mr. Kiefer and (ii) $1,600 in matching
contributions made to Capital Bancorp's 401(k) Plan on behalf of Mr.
Kiefer. The Company will be reimbursed for its life insurance premium
payments when the benefits are paid under the policies or the policies
are terminated and the cash proceeds distributed.
(6) Represents (i) $53,553 in premiums paid in 1997 for supplemental life
insurance benefits on behalf of Mr. Donohue and (ii) $1,600 in matching
contributions made to Capital Bancorp's 401(k) Plan on behalf of Mr.
Donohue. The Company will be reimbursed for its life insurance premium
payments when the benefits are paid under the policies or the policies
are terminated and the cash proceeds distributed.
(7) Represents $53,553 in premiums paid in 1996 for supplemental life
insurance benefits on behalf of Mr. Morrison. The Company will be
reimbursed for its life insurance premium payments when the benefits are
paid under the policies or the policies are terminated and the cash
proceeds distributed.
(8) Mr. Sullivan was not employed by the Company for the full fiscal year;
therefore, the amounts presented represent compensation for the period
commencing on February 28, 1995 and continuing through December 31, 1995.
(9) Represents (i) $67,852 in premiums paid in 1997 for supplemental life
insurance benefits on behalf of Mr. Sullivan and (ii) $1,600 in matching
contributions made to Capital Bancorp's 401(k) Plan on behalf of Mr.
Sullivan. The Company will be reimbursed for its life insurance premium
payments when the benefits are paid under the policies or the policies
are terminated and the cash proceeds distributed.
(10) Represents (i) $47,466 in premiums paid in 1997 for supplemental life
insurance benefits on behalf of Mr. McDermott and (ii) $1,300 in matching
contributions made to Capital Bancorp's 401(k) Plan on behalf of Mr.
McDermott. The Company will be reimbursed for its life insurance premium
payments when the benefits are paid under the policies or the policies
are terminated and the cash proceeds distributed.
* * * * *
COMPENSATION PURSUANT TO PLANS
1997 STOCK OPTION GRANTS. The following table sets forth certain
information with respect to options to purchase shares of Common Stock of the
Company granted under the Capital Factors Holding, Inc. Stock Option Plan to the
Named Executive Officers during the 1997 fiscal year and represents all options
granted by the Company to such executive officers during such period. In
accordance with rules promulgated by the Securities and Exchange Commission, the
table also describes the hypothetical gains that would exist for the respective
options based on assumed rates of annual compound stock appreciation of 5% and
10% from the date of grant to the end of the option term. These hypothetical
gains are based on assumed rates of appreciation and, therefore, the actual
gains, if any, on stock option exercises are dependent on the future performance
of the Common Stock, overall stock market conditions, and the executive
officer's continued employment with the Company and Capital Factors. As a
result, the amounts reflected in this table may not necessarily be achieved.
9
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (2)
- -------------------------------------------------------------------------------------- -------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#)(3) FISCAL YEAR ($/SH) DATE 5%($) 10($)
- -------------------------- -------------- --------------- -------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
John W. Kiefer 24,000 20.4% $13.50 4/25/2007 $204,000 $516,000
Stephen J. Donohue 12,000 10.2% $13.50 4/25/2007 $102,000 $258,000
James L. Morrison 12,000 10.2% $13.50 4/25/2007 $102,000 $258,000
Michael J. Sullivan 4,000 4.0% $13.50 4/25/2007 $ 34,000 $ 86,000
Dennis A. McDermott 10,000 8.5% $13.50 4/25/2007 $ 85,000 $215,000
</TABLE>
- -----------------
(1) The Company has not granted any freestanding SARs. For information
regarding the SARs attached to certain of the above listed options, see
"Terms of Options" below.
(2) Potential realizable value assumes that any shares acquired by the
exercise of options are held until the end of the 10-year term.
(3) See "Terms of Options" below for information on the terms of the
options, a description of attached SARs, and the exercise limitations
applicable to certain of the outstanding options of the Company during
the period that Union Planters Bank of Florida owns at least 80% of the
outstanding Common Stock of the Company.
* * * * *
TERMS OF OPTIONS. All stock options of the Company are granted under
the Capital Factors Holding, Inc. Stock Option Plan (the "Plan"). All currently
outstanding options are non-statutory (or non-incentive), were granted for a
term of 10 years, vest in 20% increments over a five-year period and have an
exercise price equal to the "fair market value" of the Common Stock on the date
of grant. The term "fair market value" is defined as the last reported sale
price for the Common Stock quoted on the Nasdaq National Market on the date
immediately prior to the date of grant. The options terminate on the termination
of the option holder's employment with the Company, except as otherwise provided
in the Plan in the event of termination by retirement, disability or death.
The ownership interest of Union Planters Bank of Florida ("Union
Planters") in the Company (currently approximately 81% of the outstanding Common
Stock) has been structured so as not to violate one of the requirements
necessary for the Company to qualify for a subsequent tax free distribution of
all or a portion of Union Planters' shares of the Company, should Union Planters
decide to make such a distribution in the future. The Company has been advised
by Union Planters that no decision has been made to make such a distribution and
that even if a decision is made to proceed with such a distribution, no
assurances can be given that all conditions precedent could be satisfied. As a
part of such corporate structure, no additional shares of the Company's Common
Stock may be issued that would reduce Union Planters' interest in the Company
below 80% without Union Planters' written approval, for the period that Union
Planters owns at least 80% of the issued and outstanding Common Stock of the
Company (the "Eighty Percent Period"). Therefore, pursuant to the Plan, during
the Eighty Percent Period no more than 200,000 of the 1,300,000 shares reserved
for issuance under the Plan may be issued pursuant to the
10
<PAGE>
exercise of options. Optionees desiring to exercise options for the remaining
1,100,000 shares available pursuant to the Plan (the "Restricted Options") must
make written inquiry of Union Planters requesting approval to exercise. Union
Planters may in its sole discretion consent to the exercise of the Restricted
Options during the Eighty Percent Period.
Each Restricted Option granted pursuant to the Plan is accompanied by a
stock appreciation right (a "SAR"). The SARs shall be exercisable as provided by
the Compensation Committee, but in no event prior to April 15, 2001, and then,
only in the event that Union Planters does not provide written approval for the
exercise of the Restricted Options. In addition, the SARs are only exercisable
during the Eighty Percent Period. Each SAR is exercisable with respect to the
same number of shares of Common Stock that can be acquired pursuant to the
exercise of a Restricted Option. Upon the exercise of a SAR, the Optionee will
be paid in cash an amount equal to the product of (i) the amount by which the
fair market value per share of Common Stock on the date on which the SAR is
exercised exceeds the exercise price per share of Common Stock prescribed in the
SAR and (ii) the number of shares subject to the exercisable portion of the SAR
with respect to which the Optionee has requested the ability to exercise. Upon
exercise of the tandem SAR, the option will be terminated
OPTION EXERCISES. The following table shows stock option exercises
during 1997 by the Named Executive Officers, including the value realized upon
exercise. In addition, this table describes the number of unexercised options
and the value of unexercised in-the-money options at the end of the 1997 fiscal
year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 1997 OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, 1997 (#) DECEMBER 31, 1997 ($)
--------------------------------------------------
SHARES
ACQUIRED ON VALUE REALIZED ($) EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) UNEXERCISABLE UNEXERCISABLE
- ---------------------------- -------------- -------------------- ------------------------- -----------------------
<S> <C> <C> <C> <C>
John W. Kiefer 0 0 24,000/120,000 $252,000/$1,140,000
Stephen J. Donohue 0 0 12,000/60,000 $126,000/$570,000
James L. Morrison 0 0 12,000/60,000 $126,000/$570,000
Michael J. Sullivan 0 0 4,000/20,000 $42,000/$190,000
Dennis A. McDermott 0 0 8,000/42,000 $84,000/$391,000
</TABLE>
- ------------------
(1) The Company has not granted any freestanding SARs. See "Terms of
Options" above for additional information on the terms of the options, a
description of attached SARs, and the exercise limitations applicable to
certain of the outstanding options of the Company during the period that
Union Planters Bank of Florida owns at least 80% of the outstanding
Common Stock of the Company.
11
<PAGE>
CAPITAL BANCORP PENSION PLAN. During 1997, all eligible officers of the
Company and Capital Factors participated in the Capital Bancorp Employees
Pension Plan, which was established in 1983 (the "Capital Bancorp Pension
Plan"). Upon the merger of Capital Bancorp with and into a subsidiary of Union
Planters Corporation on December 31, 1997, all benefit accruals under the
Capital Bancorp Pension Plan ceased. The Capital Bancorp Pension Plan is
currently scheduled to be terminated on April 30, 1998 and the assets will be
distributed to the participants upon receipt of an Internal Revenue Service
determination letter. For additional information on the merger of Capital
Bancorp, see "Merger of Capital Bancorp" above. The Company funded the Capital
Bancorp Pension Plan for its proportionate share of the costs of such plan based
on the number of its employee participants. During 1997, the Company paid
approximately $309,720 for its share of the Capital Bancorp Pension Plan costs.
The normal retirement age under the Capital Bancorp Pension Plan was
the later of age 65 or the age of the participant on the fifth anniversary of
plan participation. The monthly pension benefit for normal retirement was 1.2%
of average monthly compensation for the five consecutive years during the last
10 years of service that produce the highest average salary, plus an additional
0.6% of the portion of the average monthly compensation during these same five
years in excess of the monthly social security integration level. The entire
monthly pension benefit for normal retirement was multiplied by each year of
service at normal retirement age, not to exceed 25 years. The terms of the
Capital Bancorp Pension Plan provided that the amount of monthly compensation
taken into consideration for determination of benefits may not exceed the
Internal Revenue Service limit, which in 1997 was $13,333 ($160,000 annually).
Consequently, salary and other compensation for the Named Executive Officers, as
shown on the Summary Compensation Table above, which is in excess of the
Internal Revenue Service limit was not considered in the determination of
pension benefits.
The Capital Bancorp Pension Plan provided for early retirement at age
55 with 10 years continuous employment, as well as full vesting of benefits upon
termination of employment before retirement age and after completion of seven
years continuous employment. The Capital Bancorp Pension Plan also provided for
disability benefits. The Tax Equity and Fiscal Responsibility Act of 1982 limits
the maximum annual retirement benefits payable to an individual under a pension
plan. For 1997, the maximum annual benefits payable was $125,000.
Annual amounts of normal retirement pension payable under the Capital
Bancorp Pension Plan are illustrated in the following table. The illustration
assumes retirement as of December 31, 1997 at the normal retirement age of 65.
<TABLE>
<CAPTION>
FIVE YEAR AVERAGE YEARS OF SERVICE
----------------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ----------------------- --------------- --------------- ------------------ ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$125,000 $31,050 $41,400 $51,750 $51,750 $51,750
150,000 37,800 50,400 63,000 63,000 63,000
175,000 37,800 50,400 63,000 63,000 63,000
200,000 37,800 50,400 63,000 63,000 63,000
225,000 37,800 50,400 63,000 63,000 63,000
250,000 37,800 50,400 63,000 63,000 63,000
300,000 37,800 50,400 63,000 63,000 63,000
400,000 37,800 50,400 63,000 63,000 63,000
450,000 37,800 50,400 63,000 63,000 63,000
500,000 37,800 50,400 63,000 63,000 63,000
</TABLE>
12
<PAGE>
As of December 31, 1997, John W. Kiefer, Stephen J. Donohue, James L.
Morrison, Michael J. Sullivan and Dennis A. McDermott had credited service (to
the nearest whole year) under the Capital Bancorp Pension Plan of eleven, eight,
eight, three and six years, respectively. The benefits under the Capital Bancorp
Pension Plan are computed based on straight life annuity amounts and are subject
to deductions for social security.
EXECUTIVE EMPLOYMENT AGREEMENTS
Effective January 1, 1996, the Company and Capital Factors entered into
an employment agreement with John W. Kiefer, the President and Chief Executive
Officer of the Company and Capital Factors (the "Kiefer Agreement"). The Kiefer
Agreement has a term of five years and expires in December 2000. Upon execution
of the Agreement, Mr. Kiefer received a signing bonus of $250,000 and a $100,000
loan payable in five equal installments of principal plus all accrued interest
through the date of payment during the term, but due in full upon earlier
termination of the Kiefer Agreement. The Kiefer Agreement provides for an annual
base salary to Mr. Kiefer of $300,000 in the first year, subject to adjustment
in the discretion of the Company's Compensation Committee, although the minimum
increase will be $25,000 per year. For 1998, Mr. Kiefer's salary was increased
to $375,000. Mr. Kiefer receives a bonus on December 31 of each year during the
term of the Agreement if he is then still employed thereunder, in an amount
equal to the amount of principal and interest then due under his loan from the
Company.
The Kiefer Agreement also provides for an annual bonus based on the
Company's success in reaching certain targets for net revenues and income before
income taxes, which targets are ultimately determined by the Compensation
Committee on an annual basis. In the event the targets are reached, the portion
of the bonus relating to net revenues will equal 20% of Mr. Kiefer's salary and
the portion of the bonus relating to income before income taxes would equal 80%
of his salary. Each portion of the bonus could be a smaller or larger percentage
of his salary depending upon whether the targets are either not met or exceeded,
with the aggregate maximum in any year being 185% of salary if both targets are
doubled (148% of salary if income before taxes is doubled or higher and 37% of
salary if net revenues is doubled or higher).
Mr. Kiefer also receives deferred compensation equal to 67% of his
salary for each year that (i) net revenues and income before income taxes exceed
projected net revenues and income before income taxes as set forth in the
Company's five-year plan (which calls for increases in these items each year),
(ii) net revenues increase by 13.5% over net revenues for the prior year and
(iii) income before income taxes increases by 22.5% over income before income
taxes for the prior year. The deferred compensation vests 50% after three years
and 25% after each of the fourth and fifth years, provided that Mr. Kiefer is
still employed by the Company, although the employment condition for vesting
will lapse after the five-year term of the Kiefer Agreement if Mr. Kiefer is
employed at that time. If at the end of the five-year term, Mr. Kiefer agrees to
be employed by the Company for another five years, then all deferred
compensation that has not yet vested shall immediately vest.
At the 1997 annual meeting of the Company, the shareholders approved
the material terms of the performance goals relating to the incentive and
deferred compensation provisions of the Kiefer Agreement. Therefore, all
incentive and deferred compensation paid to Mr. Kiefer pursuant to the Kiefer
Agreement will be deductible by the Company for purposes of Section 162(m) of
the Internal Revenue Code of 1986, as amended.
13
<PAGE>
In addition, pursuant to the Kiefer Agreement, upon the effective date
of the initial public offering of the Company's Common Stock (which was July
1996), Mr. Kiefer received options to purchase one percent of the Company's
Common Stock outstanding after giving effect to such offering (but not including
the exercise of the overallotment option granted to the underwriters of such
offering) at the initial public offering price, subject to the terms and
conditions of the Capital Factors Holding, Inc. Stock Option Plan then in
effect.
Upon the Company's termination of Mr. Kiefer's employment without
cause, Mr. Kiefer shall be entitled to receive, among other things, (i) base
salary through the date of such termination, (ii) all previous bonuses and a
pro-rata portion of the bonus payable, if any, for the year in which termination
occurs, (iii) an acceleration of the vesting of all deferred compensation and
(iv) subject to mitigation if he obtains subsequent employment, his base salary
through the expiration date of the Agreement. In the event of a change in
control, Mr. Kiefer shall receive the same compensation as if terminated without
cause except that in lieu of the compensation payable in (iv) above, Mr. Kiefer
shall be entitled to receive a lump sum payment equal to two times his base
salary and prior year's bonus if he terminates his employment because of changes
in his employment situation and an additional amount equal to two times his
prior year's deferred compensation, if any, if he is terminated by the Company
without cause within one year after a change in control. Upon termination for
"cause" or upon voluntary resignation, Mr. Kiefer shall be entitled to receive
his base salary through the date of such termination. The Kiefer Agreement also
contains certain non-competition covenants and covenants against solicitation of
clients and employees for a competitive business.
Capital Factors is a party to an employment agreement with Stephen J.
Donohue, Capital Factors' Executive Vice President and Regional Manager of the
New York office, which commenced on January 1, 1997 and expires on December 31,
2001 (the "Donohue Agreement"). The Donohue Agreement provided for a base salary
of $255,000 in 1997, with annual increases thereafter of not less than 8%. For
1998, Mr. Donohue's salary was increased to $276,000. Pursuant to the Donohue
Agreement, Mr. Donohue received a signing bonus of $100,000 and a $100,000 loan
payable in five equal installments of principal plus all accrued interest at the
date of payment during the term, but due in full upon earlier termination of the
Agreement. Under the Donohue Agreement, Mr. Donohue receives a bonus on December
31 of each year during the term of the agreement if he is still employed
thereunder in an amount equal to the amount of principal and interest then due
under his loan from Capital Factors. The Donohue Agreement also provides for an
annual bonus equal to 3% of Capital Factors' earnings before income taxes
("EBT") attributable to the New York office, but not to exceed twice his base
salary.
Under the Donohue Agreement, Mr. Donohue also receives deferred
compensation equal to 50% of his salary for each year that (i) net revenues for
the New York region increase by 13.5% over net revenues for the prior year and
(ii) income before income taxes for the New York region increases by 22.5% over
income before income taxes for the prior year. The deferred compensation vests
50% after three years and 25% after each of the fourth and fifth year, provided
that Mr. Donohue is still employed by Capital Factors, although the employment
condition for vesting will lapse after the five-year term of the employment
agreement if Mr. Donohue is employed at that time. If at the end of the
five-year term, Mr. Donohue agrees to be employed by Capital Factors for another
five years, then all deferred compensation that has not yet vested shall
immediately vest.
Under the Donohue Agreement, Mr. Donohue is entitled to receive, upon
the termination of his employment without cause, (i) his base salary through the
expiration date of such agreement, subject to mitigation if he obtains
subsequent employment, and (ii) all previous unpaid bonuses and a pro-rata
portion of the bonus payable, if any, for the year in which the termination
occurred. In the event of a
14
<PAGE>
change in control, Mr. Donohue is entitled to terminate his employment agreement
in the event of certain changes in his employment situation. Upon his
termination as a result of a change in control, Mr. Donohue is entitled to
receive (i) his base salary through the date of such termination, (ii) all
previous unpaid bonuses and a pro-rata portion of the bonus payable, if any, for
the year in which termination occurred, (iii) an acceleration of the vesting of
all deferred compensation, and (iv) a lump sum payment equal to two times his
base salary and prior year bonus if he terminates his employment because of
changes in his employment situation, and an additional amount equal to two times
his prior year's deferred compensation, if any, if he is terminated by Capital
Factors without cause within one year of a change of control. Upon termination
for "cause" or upon voluntary resignation, Mr. Donohue shall be entitled to
receive his base salary through the date of such termination.
Payment of the bonus and deferred compensation in certain years during
the term of the Donohue Agreement that would not otherwise be deductible by
reason of Section 162(m) of the Internal Revenue Code of 1986, as amended, is
subject to certain approvals, including shareholder approval. However, the
Company's Compensation Committee may, at its option, defer payment of amounts
that would not otherwise be deductible under Section 162(m) until a time when it
would be deductible. The Donohue Agreement also contains certain non-competition
covenants and covenants against solicitation of clients and employees for a
competitive business.
Effective January 1, 1997, Capital Factors entered into an employment
agreement with James L. Morrison, Capital Factors' Executive Vice President and
Regional Manager of the California office (the "Morrison Agreement"). The
Morrison Agreement has a term of five years and expires in December 2001. The
Morrison Agreement provides for a base salary of $210,000 in 1997, with annual
increases of not less than 8% thereafter. For 1998, Mr. Morrison's salary was
increased to $245,000. Upon the execution of the Morrison Agreement, Mr.
Morrison received a signing bonus of $100,000 and a $100,000 loan payable in
five equal installments of principal plus all accrued interest through the date
of payment during the term, but due in full upon earlier termination of the
employment agreement. Mr. Morrison receives a bonus on December 31 of each year
during the term of the new agreement if he is then still employed thereunder in
an amount equal to the amount of principal and interest then due under such
loan. The Morrison Agreement also provides for an annual bonus equal to 3% of
EBT attributable to the California office of Capital Factors, but not to exceed
twice his base salary.
Under the Morrison Agreement, Mr. Morrison receives deferred
compensation equal to 50% of his salary for each year that (i) net revenues for
the California region increase by 13.5% over net revenues for the prior year and
(ii) income before income taxes for the California region increases by 22.5%
over income before income taxes for the prior year. The deferred compensation
vests 50% after three years and 25% after each of the fourth and fifth years,
provided that Mr. Morrison is still employed by Capital Factors, although the
employment condition for vesting will lapse after the five-year term of the
employment agreement if Mr. Morrison is employed at that time. If at the end of
the five-year term, Mr. Morrison agrees to be employed by Capital Factors for
another five years, than all deferred compensation that has not yet vested shall
immediately vest.
Under the Morrison Agreement, Mr. Morrison is entitled to receive, upon
the termination of his employment without cause, (i) his base salary through the
expiration date of such agreement, subject to mitigation if he obtains
subsequent employment, and (ii) all previous unpaid bonuses and a pro-rata
portion of the bonus payable, if any, for the year in which the termination
occurred. In the event of a change in control, Mr. Morrison is entitled to
terminate his employment agreement in the event of certain changes in his
employment situation. Under the Morrison Agreement, upon his termination as a
result of a change in control, Mr. Morrison is entitled to receive (i) his base
salary through the date of such
15
<PAGE>
termination, (ii) all previous unpaid bonuses and a pro-rata portion of the
bonus payable, if any, for the year in which termination occurred, (iii) an
acceleration of the vesting of all deferred compensation, and (iv) a lump sum
payment equal to two times his base salary and prior year bonus if he terminates
his employment because of changes in his employment situation, and an additional
amount equal to two times his prior year's deferred compensation, if any, if he
is terminated by Capital Factors without cause, within one year of a change of
control. Upon termination for "cause" or upon voluntary resignation, Mr.
Morrison shall be entitled to receive his base salary through the date of such
termination.
Payment of the bonus and deferred compensation in certain years during
the term of the Morrison Agreement that would not otherwise be deductible by
reason of Section 162(m) of the Internal Revenue Code of 1986, as amended, is
subject to certain approvals, including shareholder approval. However, the
Company's Compensation Committee may, at its option, defer payment of amounts
that would not otherwise be deductible under Section 162(m) until a time when it
would be deductible. The Morrison Agreement also contains certain
non-competition covenants and covenants against solicitation of clients and
employees for a competitive business.
REPORT ON EXECUTIVE COMPENSATION
Pursuant to the rules of the Securities and Exchange Commission, the
Compensation Committee (the "Committee") and the Board of Directors of the
Company are required to provide a report explaining the rationale and
considerations that led to fundamental compensation decisions affecting the
Company's and Capital Factors' executive officers, including the Named Executive
Officers, during the past fiscal year. Set forth below is the report of the
Committee and the Board of Directors regarding compensation policies of the
Company and Capital Factors. THIS REPORT SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE EXTENT THAT THE
COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT
OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
Decisions regarding the compensation of the Company's and Capital
Factors' executive officers are made by both the Committee and the Board of
Directors. The Committee has final authority with respect to the compensation
paid to the Chief Executive Officer and with respect to options granted pursuant
to the Company's Stock Option Plan. In addition, the Committee makes
recommendations to the Board of Directors regarding compensation paid to the
other executive officers of the Company and Capital Factors. Final determination
with respect to compensation paid to executive officers, other than the Chief
Executive Officer, is made by the Board. The Committee's and the Board's
executive compensation policies are intended to establish levels of annual
compensation that are consistent with the Company's annual and long-term goals
and that reward superior corporate performance as well as individual
achievements.
GENERAL EXECUTIVE COMPENSATION POLICIES. The primary elements of the
Company's compensation program are base salary, signing and performance-based
bonuses, deferred compensation, and a stock option plan designed to provide
long-term incentives. The general philosophy of the Committee and the Board with
respect to the compensation of the Company's and Capital Factors' executive
officers (including the Named Executive Officers) is to offer competitive
compensation programs designed to attract and retain key executives who are
critical to the long-term success of the Company and to recognize an
individual's contribution and personal performance, as well as the Company's
performance. More specifically, factors considered in determining compensation
during the 1997 fiscal year, to the extent applicable, included the Chief
Executive Officer's recommendations,
16
<PAGE>
specific accomplishments of the executive officers, the Company's and each
individual's historical and projected performance and success in reaching
performance goals and projections, and the Company's earnings and financial
condition. Salary determinations are generally based on the prior year's
performance and bonuses are generally based on the current year. The factors
considered, the weight allocated to such factors and the ultimate determination
of compensation during 1997 were subjective.
In addition, in determining executive officer compensation, the
Committee and the Board took into account that the Company has been very
successful under present management. In connection therewith, the Committee and
the Board determined that it was in the Company's best interest, both to
maximize future performance and to ensure a long-term commitment from top
management, for the Company's Chief Executive Officer and Executive Vice
Presidents in charge of the two largest regional offices (the "Regional
Executive Vice Presidents") to have long-term employment agreements with
competitive compensation, including a strong base salary and substantial
incentives. The Chief Executive Officer's agreement was entered into in January
1996 and the Regional Executive Vice Presidents' agreements were entered into in
January 1997.
BASE SALARY: In the case of the executive officers, salary was
determined at the beginning of the year. Although the Regional
Executive Vice Presidents were parties to employment agreements, the
increases in their salaries were, to some extent, discretionary.
Minimum increases were mandatory under the agreements, but, as a result
of performance, certain actual increases were higher. In determining
salaries for all executive officers other than the Chief Executive
Officer, significant weight was given to the recommendation of the
Chief Executive Officer. The most important factors (in each case,
where applicable) were historical performance in meeting individual
goals, the success of the individual's region (or department), his or
her relationships with Company clients, the development of new
business, past compensation and the Chief Executive Officer's and Board
of Directors' estimate of future Company performance. The factors
considered, the weight allocated to such factors and the ultimate
determination of base salary were subjective.
ANNUAL INCENTIVES: All executive officers received bonuses, in part
because of the increase in the Company's net profits, and, in part,
because of individual performance. Each of the Regional Executive Vice
President's employment agreements provides for bonuses based on a
percentage of the earnings of his region. Bonuses paid to executive
officers without employment agreements were not due to specific
performance criteria, but were subjectively determined based upon an
analysis of many factors, including both individual and Company
performance. In connection with the foregoing, the Committee and the
Board reviewed each region's earnings and revenues compared to the
prior year. In addition, the Committee and the Board considered such
additional factors, where applicable, as (i) whether profitability and
margin goals were met or exceeded; and (ii) the handling of clients,
marketing and business development innovations, with primary emphasis
on increased profitability and revenues as well as exceeding
performance goals. The Committee and the Board believe that the amount
of the potential bonuses provide a strong incentive to management and
represent acceptable payments if the results are achieved. The factors
considered, the weight allocated to such factors and the ultimate
determination of bonuses were subjective.
LONG-TERM INCENTIVES: The Company also attempts to provide incentives
to its executive officers to remain with the Company and to improve
performance through the grant of stock options. Options allow executive
officers to share, to some extent, in shareholders' return on equity.
All Company options vest in staggered amounts over five years because
the Committee
17
<PAGE>
believed that this would provide an incentive to remain with the
Company. The determination of how many options to grant to an executive
officer depended on his or her job level and performance, and Company
performance. Given the foregoing factors, with the emphasis on Company
performance, current executive officers (other than the Chief Executive
Officer) received options to purchase between 4,000 and 12,000 shares
in 1997. The number of options granted was subjective but generally
correlated to compensation of the executive officer, as well as tenure
with the Company, with more senior and higher paid executive officers
generally receiving more options. The Committee also took into
consideration the number of options previously granted to each
executive officer. The Committee has granted, and presently intends to
continue to grant on an annual basis, executive officers stock options
based upon their performance, as an incentive or for other reasons. All
of the options granted in 1997 are subject to restrictions on exercise
and are accompanied by SARs, as described in "Compensation Pursuant to
Plans -- Terms of Options" above. As a result of the risks inherent in
these options, the number of options granted to executive officers was
greater than it might have otherwise been.
The Committee and the Board of Directors also continued to pay
the premiums for life insurance or split dollar life insurance for
certain executive officers (including the Chief Executive Officer). The
Committee and the Board determined that this is a benefit customarily
given to executives of similarly situated companies and that it was
warranted by the Company's profitability and growth and the executive
officers' performance. This determination was subjective.
CHIEF EXECUTIVE OFFICER'S 1997 COMPENSATION. The Chief Executive
Officer's salary for 1997 was determined pursuant to his employment agreement,
but was, to some extent, discretionary. Factors considered included the Chief
Executive Officer's past performance and relationships. Significant weight was
given to compensation paid to chief executive officers of comparable factoring
and finance companies, the Company's emphasis on growth over the next five years
and the importance of the position. The Committee also considered the Company's
success under existing management, and, in particular, the central role played
by the Chief Executive Officer during his tenure with the Company in framing the
management and investment policies that have enabled the Company's and Capital
Factors' successful performance, as evidenced by such items as consistent and
strong revenues and earnings growth, the Company's reputation and the
performance of the Company relative to other factoring and commercial finance
companies. The Committee determined that it was important to reward such
performance with increased salary.
The Chief Executive Officer's bonus was established by his employment
agreement. The Chief Executive Officer is entitled to (i) a bonus, the amount of
which depends upon reaching certain net revenue and income before income tax
targets, and (ii) deferred compensation, which is dependent upon exceeding both
net revenue and income before income tax targets determined by the Committee or
the Board. These standards require continued earnings and revenue growth for
significant bonuses (other than signing bonuses) or any deferred compensation to
be paid. The Chief Executive Officer also received options to purchase 24,000
shares of Common Stock, primarily because his performance entitled him to a
significant number of shares and because it was believed that this would provide
a substantial incentive for continued positive performance. The Committee also
took into consideration the number of options previously granted to the Chief
Executive Officer.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") generally disallows a public company's deduction for compensation to any
one employee in excess of $1.0 million
18
<PAGE>
per year unless the compensation is pursuant to a plan approved by the public
company's shareholders. None of the Named Executive Officers received annual
cash compensation in excess of the $1.0 million cap provided in Section 162(m)
during 1997. The Committee and the Board presently intend to use their best
efforts to take the necessary steps to ensure compliance with Section 162(m) of
the Code. Shareholder approval has been obtained for the Capital Factors
Holding, Inc. Stock Option Plan and the material terms of the performance goals
relating to the incentive compensation and deferred compensation provisions set
forth in the employment agreement with the Chief Executive Officer.
STEPHEN N. ASHMAN, RONALD S. CHASE, CYNTHIA R. COHEN, NORMAN G. EINSPRUCH,
DANIEL M. HOLTZ, JAVIER J. HOLTZ, JOHN W. KIEFER, JACK D. LISTANOWSKY, HAROLD L.
OSHRY, BRUCE S. RAIFFE
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is composed of the following
members of the Board of Directors: Ronald S. Chase, Cynthia R. Cohen, Jack D.
Listanowsky and Harold L. Oshry. The Compensation Committee has final approval
authority with respect to the compensation paid to the Chief Executive Officer
and makes recommendations to the Board of Directors with respect to the
compensation of other officers and key employees. The Compensation Committee is
also responsible for grants of options under the Capital Factors Holding, Inc.
Stock Option Plan. No member of the Compensation Committee is serving or has
served as an officer or employee of the Company or Capital Factors. Ronald
Chase, who is also a director of Union Planters Bank of Florida (the Company's
principal shareholder which owns approximately 81% of the outstanding Common
Stock), participates in the determination of compensation for executive officers
of that company through his service on its Compensation and Benefits Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LOANS FROM AFFILIATES. The Company has a $150.0 million revolving line
of credit facility (the "Credit Facility") with Union Planters Bank of Florida,
the Company's principal shareholder (which owns approximately 81% of the
outstanding Common Stock of the Company), pursuant to which the Company had
outstanding borrowings of approximately $111.8 million as of December 31, 1997.
The Credit Facility bears interest at the prime rate as published in the Wall
Street Journal (8.50% at December 31, 1997), is subject to annual review by
Union Planters Bank of Florida and is due on demand. The maximum amount
outstanding at any month-end during 1997 was $119.5 million. The interest
expense for 1997 was $7.4 million and the average interest rate was 8.58%. The
amount of funds which can be drawn from the Credit Facility is subject to
regulations limiting Union Planters Bank of Florida's investment in its
subsidiaries. Pursuant to applicable regulations, at December 31, 1997, only
approximately $151.4 million could be outstanding under the Credit Facility.
In addition, in January 1998, the Company entered into a $150.0 million
revolving line of credit facility with Union Planters Corporation (the "UPC
Facility"), the indirect parent company of Union Planters Bank of Florida. The
UPC Facility currently bears interest at the prime rate, as published by the
Wall Street Journal, minus three-quarters of a percent (7.75% at March 31,
1998), is subject to annual review by Union Planters Corporation and is due on
demand.
PENSION PLAN. During 1997, eligible employees of the Company
participated in the Capital Bancorp Pension Plan. For additional information,
see "Compensation Pursuant to Plans -- Capital Bancorp Pension Plan" above. The
Company's share of the required contributions to the Capital Bancorp Pension
Plan were based on a fixed percentage of the Company's payroll and was remitted
19
<PAGE>
monthly. The Company remitted approximately $309,720 for the year ended December
31, 1997 for its share of the Capital Bancorp Pension Plan's costs.
GROUP MEDICAL AND LIFE PLANS. During 1997, Capital Bancorp obtained
group medical, dental and life insurance coverage on behalf of the Company.
Premiums were charged to the Company at the same amount as they were assessed by
the insurance companies to Capital Bancorp with respect to the Company. During
the year ended December 31, 1997, the Company paid insurance premiums of
approximately $662,000 for its actual portion of such insurance premiums.
INSURANCE EXPENSES. During 1997, the Company reimbursed Capital Bancorp
for its portion of general insurance expenses. Payments to Capital Bancorp for
expenses relating to property insurance and directors and officers liability
insurance during the year ended December 31, 1997 aggregated approximately
$85,000.
LETTERS OF CREDIT. During 1997, Union Planters Bank of Florida provided
approximately $166.5 million of letters of credit for clients of the Company.
For a fee, the Company guarantees the payment by its clients under these letters
of credit. Fees charged for issuance of the letters of credit are paid directly
to Union Planters Bank of Florida and amounted to approximately $605,000 for the
year ended December 31, 1997.
INCOME TAX PAYMENTS TO AFFILIATES. For the 1997 fiscal year, the
results of operations of the Company were included in the consolidated federal
income tax returns filed by Capital Bancorp. Capital Bancorp allocated income
taxes to the Company calculated on a separate return basis, except that tax
benefits were allocated to the Company to the extent such benefits were useable
by the consolidated group. The Company paid to Capital Bancorp approximately
$9.6 million in 1997 for income taxes related to its fiscal year ended December
31, 1997. For the 1998 fiscal year, the results of operations of the Company
will be included in the consolidated federal income tax returns filed by Union
Planters Corporation.
TAX SHARING AND INDEMNITY AGREEMENT. For the 1997 fiscal year, the
results of operations of the Company were included in the tax returns filed by
Capital Bancorp's affiliated, combined or unitary groups for federal and certain
state income and franchise tax purposes. The members of those groups, including
the Company, were parties to a tax allocation and indemnity agreement that
allocated the liability for those taxes among them. Under the agreement, the tax
liabilities of the group were allocated between, on the one hand, the Parent
Group (the "Parent Group"), consisting of Capital Bancorp and its direct and
indirect wholly-owned subsidiaries other than the Company and its direct and
indirect wholly-owned subsidiaries (the "Factors Group") and, on the other hand,
the Factors Group, pursuant to a method specified in regulations of the Treasury
Department that would impose on the Parent Group and the Factors Group liability
for an amount that corresponds (with various modifications) to the liability
that the Parent Group and the Factors Group each would incur if the Parent Group
and the Factors Group filed tax returns as separate affiliated, combined or
unitary groups. In addition, the agreement provided that the Factors Group would
indemnify the Parent Group for any increase in the tax liability of the group
that was attributable to the Factors Group, and the Factors Group would be
entitled to receive any tax refund that is attributable to the Factors Group.
The agreement similarly provided that the Parent Group would indemnify the
Factors Group for an increase in the tax liability of the group that was
attributable to the Parent Group. It is currently anticipated that the Company
will enter into a similar tax allocation and indemnity agreement with Union
Planters Corporation for the 1998 fiscal year and beyond.
20
<PAGE>
LOANS TO OFFICERS OF THE COMPANY. From time to time, Union Planters
Bank of Florida makes loans and extends credit to certain of the Company's
officers and directors, including John W. Kiefer, the President, Chief Executive
Officer and a director of the Company. In the opinion of Union Planters Bank of
Florida, all of such loans and extensions of credit were made in ordinary course
of business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other third parties, and do not involve more than normal risks of collectability
or present any other unfavorable features.
AGREEMENT BETWEEN THE COMPANY, CAPITAL FACTORS AND UNION PLANTERS BANK
OF FLORIDA. Pursuant to an agreement between the Company, Capital Factors and
Union Planters Bank of Florida, the Company has agreed not to issue any shares
of Common Stock that would reduce Union Planters Bank of Florida's interest
below 80% or any shares of any other class of capital stock without Union
Planters Bank of Florida's written approval, during the period that Union
Planters Bank of Florida owns at least 80% of the issued and outstanding Common
Stock of the Company (the "Eighty Percent Period"). The Company may also not
acquire certain assets, amend its bylaws, change the size of its Board or
Directors or fill vacancies in the Board without such approval during the Eighty
Percent Period. Similar restrictions apply to Capital Factors pursuant to this
Agreement, except that Capital Factors is restricted from issuing any shares of
capital stock without approval by Union Planters Bank of Florida. For additional
information regarding such agreement, see "Compensation Pursuant to Plans --
Terms of Options" above.
TRANSACTIONS WITH AFFILIATES OF DIRECTORS. Some of the clients of
Capital Factors from time to time sell goods or render services to entities
which are affiliated with certain directors. Therefore, Capital Factors may
purchase receivables due from such affiliates or provide loans collateralized by
such receivables. Such transactions, however, are in the ordinary course of
business, are on substantially the same terms as those prevailing at the time
for comparable transactions with other third parties and do not involve more
than normal risks of collectability or present any other unfavorable features.
APPROVAL OF RELATED PARTY TRANSACTIONS. The Company has adopted a
policy whereby all transactions between the Company and one or more of its
affiliates must be approved in advance by a majority of the Company's Conflict
of Interest Committee.
21
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph presents a comparison of the cumulative total
shareholder return on the Company's Common Stock with the Nasdaq Stock Market
Index and the SNL Commercial Finance Companies Index. This graph assumes that
$100 was invested on July 10, 1996 (the date the Company became a reporting
entity pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended) in the Company's Common Stock and in the other indices. Returns are
based on the change in quarter-end to quarter-end price and assume that all
dividends were reinvested. The stock price performance shown below is not
necessarily indicative of future price performance.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
7/10/96 9/20/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Factors Holding, Inc. 100 121 147 169 206 215 224
NASDAQ - Total US 100 108 113 107 126 148 139
SNL Commercial Finance Companies Index 100 107 112 115 136 165 167
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
THIS GRAPH SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL
STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS
INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH
ACTS.
22
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 31, 1998
concerning (i) the nominees for re-election to the Company's Board of Directors
(see "Election of Directors"); (ii) the Named Executive Officers (see "Executive
Compensation -- Annual Compensation"); (iii) all directors, nominees for
director and executive officers of the Company as a group; and (iv) any person
who is known to be the beneficial owner, as such term is defined in Rule 13d-3
of the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, of more than 5% of the outstanding shares of the Company's
Common Stock, according to filings by such persons with the Securities and
Exchange Commission.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
OWNERSHIP OF COMMON COMMON STOCK
NAME AND ADDRESS STOCK (1) OUTSTANDING
- ----------------------------------------------------------- ------------------- --------------
<S> <C> <C>
DIRECTORS:
Stephen N. Ashman 2,000(2) *
Ronald S. Chase 14,000(2) *
Cynthia R. Cohen 2,000(2) *
Norman G. Einspruch 2,000(2) *
Daniel M. Holtz 2,000(2) *
Javier J. Holtz 5,000(3) *
John W. Kiefer 76,200(4) *
Jack D. Listanowsky 2,000(2) *
Jackson W. Moore 0 *
Harold L. Oshry 42,000(2) *
Bruce S. Raiffe 14,500(2) *
Benjamin W. Rawlins 0 *
OTHER NAMED EXECUTIVE OFFICERS:
Stephen J. Donohue 12,000(5) *
James L. Morrison 13,000(5) *
Michael J. Sullivan 7,200(6) *
Dennis A. McDermott 9,000(7) *
ALL CURRENT DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY AS A GROUP (15 persons) 208,700 1.7%
5% OWNERS:
Union Planters Bank of Florida 10,000,000(8) 81.3%
1221 Brickell Avenue
Miami, Florida 33131
</TABLE>
- -----------------------
*Less than 1%
(1) The nature of the reported beneficial ownership is unshared voting and
investment power unless otherwise indicated. Beneficial ownership of Common
Stock does not reflect shares that would be received upon the exercise of
options that are not exercisable within 60 days. Daniel and Javier Holtz
are brothers.
(Footnotes continued on following page.)
23
<PAGE>
(2) Includes options to acquire 2,000 shares of Common Stock that are currently
exercisable, but does not include 10,000 shares of Common Stock which he or
she has the right to acquire pursuant to certain stock options which are
not currently exercisable. See "Executive Compensation -- Compensation
Pursuant to Plans -- Terms of Options" above for more information regarding
the vesting of the Company's stock options and the limitations on exercise
of options during the Eighty Percent Period.
(3) Includes options to acquire 5,000 shares of Common Stock that are currently
exercisable, but does not include 30,000 shares of Common Stock that Mr.
Holtz has the right to acquire pursuant to certain stock options which were
granted in 1996 and 1997 but are not currently exercisable. See "Executive
Compensation -- Compensation Pursuant to Plans -- Terms of Options" above
for more information regarding the vesting of the Company's stock options
and the limitations on exercise of options during the Eighty Percent
Period.
(4) Includes options to acquire 24,000 shares of Common Stock that are
currently exercisable, but does not include 120,000 shares of Common Stock
that Mr. Kiefer has the right to acquire pursuant to certain stock options
which were granted in 1996 and 1997 but are not currently exercisable. See
"Executive Compensation -- Compensation Pursuant to Plans -- Terms of
Options" above for more information regarding the vesting of the Company's
stock options and the limitations on exercise of options during the Eighty
Percent Period.
(5) Includes options to acquire 12,000 shares of Common Stock that are
currently exercisable, but does not include 60,000 shares of Common Stock
that such person has the right to acquire pursuant to certain stock options
which were granted in 1996 and 1997 but are not currently exercisable. See
"Executive Compensation -- Compensation Pursuant to Plans -- Terms of
Options" above for more information regarding the vesting of the Company's
stock options and the limitations on exercise of options during the Eighty
Percent Period.
(6) Includes options to acquire 4,000 shares of Common Stock that are currently
exercisable, but does not include 20,000 shares of Common Stock that Mr.
Sullivan has the right to acquire pursuant to certain stock options which
were granted in 1996 and 1997 but are not currently exercisable. See
"Executive Compensation -- Compensation Pursuant to Plans -- Terms of
Options" above for more information regarding the vesting of the Company's
stock options and the limitations on exercise of options during the Eighty
Percent Period.
(7) Includes options to acquire 8,000 shares of Common Stock that are currently
exercisable, but does not include 42,000 shares of Common Stock that Mr.
McDermott has the right to acquire pursuant to certain stock options which
were granted in 1996 and 1997 but are not currently exercisable. See
"Executive Compensation -- Compensation Pursuant to Plans -- Terms of
Options" above for more information regarding the vesting of the Company's
stock options and the limitations on exercise of options during the Eighty
Percent Period.
(8) This information was obtained from a Schedule 13G filed with the Securities
and Exchange Commission on February 13, 1998.
24
<PAGE>
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before
the Annual Meeting. If, however, any other business should properly come before
the Annual Meeting, the persons named in the accompanying proxy will vote
proxies as, in their discretion, they may deem appropriate, unless they are
directed by a proxy to do otherwise.
MISCELLANEOUS
INDEPENDENT AUDITORS
The Audit Committee and the Board of Directors have selected the firm
of Price Waterhouse LLP, independent certified public accountants, to examine
the consolidated financial statements of the Company and its subsidiaries for
the 1998 fiscal year. Representatives of Price Waterhouse LLP are expected to be
present at the Annual Meeting and will have an opportunity to make a statement
if they desire to do so and to respond to appropriate questions from
shareholders.
The independent certified public accountants for the Company and its
subsidiaries for the fiscal year ended December 31, 1997 and for the prior nine
fiscal years were Deloitte & Touche LLP ("Deloitte"). On March 27, 1998, the
Company decided not to continue Deloitte's engagement as its independent
certified public accountants and on the same day the Company's Audit Committee
recommended the engagement of Price Waterhouse, LLP, which recommendation was
approved by the Company's Board of Directors. Price Waterhouse LLP is the
independent certified public accountant for Union Planters Bank of Florida,
which currently owns 81% of the Company's outstanding shares.
Deloitte's report on the Company's financial statements for each of the
fiscal years ended December 31, 1997 and 1996 did not contain an adverse opinion
or a disclaimer of opinion, nor was it qualified or modified as to uncertainty,
audit scope or accounting principles.
In connection with the audits of the Company's financial statements for
each of the fiscal years ended December 31, 1997 and 1996, there were no
disagreements with Deloitte on any matters of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
if not resolved to the satisfaction of Deloitte, would cause Deloitte to make
reference to the matter in its report on the Company's financial statements for
such periods.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors and persons who own more
than 10% of the Common Stock to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Executive officers,
directors and 10% shareholders are required by regulation to furnish the Company
with all such Section 16(a) filings made. The Company believes that, during the
fiscal year ended December 31, 1996, its executive officers, directors and
holders of more than 10% of the Company's Common Stock complied with all
applicable Section 16(a) filing requirements, except that a Form 4 relating to
one transaction was inadvertently filed late by each of John W. Kiefer,
President and Chief Executive Officer of the Company, and by Harold L. Oshry, a
director of the Company.
25
<PAGE>
SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a shareholder intending to present a proposal for action at the
Company's 1999 Annual Meeting of Shareholders must deliver a proposal in writing
to the Company's principal executive offices no later than December 28, 1998 for
inclusion in the Company's proxy statement relating to such meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Javier J. Holtz, Chairman of the Board
April 27, 1998
26
<PAGE>
CAPITAL FACTORS HOLDING, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John W. Kiefer and Ronald S. Chase, or any one
of them with full power of substitution, proxies to vote at the Annual Meeting
of Shareholders of Capital Factors Holding, Inc. (the "Company") to be held on
May 22, 1998 at 10:00 a.m., local time, and at any postponements or adjournments
thereof, hereby revoking any proxies heretofore given, all shares of Common
Stock of the Company held or owned by the undersigned as directed on the reverse
side of this proxy card, and in their discretion upon such other matters as may
come before the meeting.
/ X / Please mark your
vote as in this sample
FOR WITHHELD
1. Election
of Directors / / / /
FOR, except vote withheld from the following nominees:
- --------------------------------------------
Nominees: Stephen N. Ashman
Ronald S. Chase
Cynthia R. Cohen
Norman G. Einspruch
Daniel M. Holtz
Javier J. Holtz
John W. Kiefer
Jack D. Listanowsky
Jackson W. Moore
Harold L. Oshry
Bruce S. Raiffe
Benjamin W. Rawlins, Jr.
THIS PROXY IS REVOCABLE AND WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. UNLESS CONTRARY DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED "FOR" ALL OF THE NOMINEES FOR DIRECTOR AND OTHERWISE IN
THE DISCRETION OF THE PROXIES UPON ALL OTHER MATTERS THAT MAY COME BEFORE THE
MEETING.
Please mark, sign, date and return this proxy card promptly, using the enclosed
envelope.
<TABLE>
<S> <C>
Signature: ____________________________________________________________ Date ____________________________ 1998
Signature: ____________________________________________________________ Date ____________________________ 1998
(IF HELD JOINTLY)
</TABLE>
Note: Please sign exactly as your name(s) appears hereon. When signing in a
representative capacity, please give title.
