SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
CAPITAL TITLE GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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CAPITAL TITLE GROUP, INC.
2901 East Camelback Road
Phoenix, Arizona 85016
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NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD ON MAY 16, 2000
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To Our Stockholders:
The 2000 Annual Meeting of Stockholders (the "Annual Meeting") of Capital
Title Group, Inc. (the "Company") will be held at 2:00 p.m., M.S.T., on Tuesday,
May 16, 2000, at the offices of The Miller Group, 4909 East McDowell Road,
Phoenix, Arizona 85008 for the following purposes:
1. To elect two directors to serve for three-year terms;
2. To ratify the selection of Ernst & Young LLP as independent auditors
for the Company for the fiscal year ending December 31, 2000;
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof. Management is presently aware of
no other business to come before the meeting.
The Board of Directors has fixed the close of business on Monday, March 13,
2000 as the record date for the determination of Stockholders entitled to
receive notice of and to vote at the Annual Meeting or any adjournments thereof
(the "Record Date").
All stockholders are cordially invited to attend the Meeting in person. To
assure your representation at the Meeting, however, you are urged to mark, sign,
date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the Meeting may vote in person even if he or she previously has returned a
proxy.
Dale A. Head
Secretary
Phoenix, Arizona
March 22, 2000
<PAGE>
CAPITAL TITLE GROUP, INC.
2901 East Camelback Road
Phoenix, Arizona 85016
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PROXY STATEMENT
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IMPORTANT: IT IS IMPORTANT THAT YOUR SHAREHOLDINGS BE REPRESENTED AT THIS
MEETING. PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY CARD
IN THE ACCOMANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
VOTING AND OTHER MATTERS
GENERAL
The enclosed proxy is solicited on behalf of Capital Title Group, Inc., a
Delaware corporation (the "Company"), by the Company's board of directors (the
"Board of Directors") for use at the Annual Meeting of Stockholders to be held
at 2:00 p.m. on Tuesday, May 16, 2000 (the "Meeting"), or at any adjournment
thereof, for the purposes set forth in this Proxy Statement and in the
accompanying Notice of Annual Meeting of Stockholders. The Meeting will be held
at the offices of The Miller Group, 4909 East McDowell Road, Phoenix, Arizona
85008.
These proxy solicitation materials were mailed on or about March 31, 2000
to all stockholders entitled to vote at the Meeting.
VOTING SECURITIES AND VOTING RIGHTS
Stockholders of record at the close of business on March 13, 2000 (the
"Record Date") are entitled to notice of and to vote at the Meeting. On the
Record Date, there were issued and outstanding 16,957,901 shares of the
Company's Common Stock, $.001 par value (the "Common Stock").
The presence, in person or by proxy, of the holders of a majority of the
total number of shares of Common Stock outstanding constitutes a quorum for the
transaction of business at the Meeting. Each Stockholder voting at the Meeting,
either in person or by proxy, may cast one vote per share of Common Stock held
on all matters to be voted on at the Meeting. The affirmative vote of a majority
of the outstanding shares of Common Stock of the Company present in person or
represented by proxy at the Meeting and entitled to vote (assuming that a quorum
is present) is required for (i) the election of directors and (ii) for the
ratification of the appointment of Ernst & Young LLP as the independent auditors
of the Company for the year ending December 31, 2000.
Votes cast by proxy or in person at the Meeting will be tabulated by the
election inspectors appointed for the Meeting and will determine whether a
quorum is present. The election inspectors will treat abstentions as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval of any matter
submitted to the stockholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
VOTING OF PROXIES
When a proxy is properly executed and returned, the shares it represents
will be voted at the Meeting as directed. If no specification is indicated, the
shares will be voted (i) "for" the election of directors; (ii) "for" the
ratification of the appointment of Ernst & Young LLP as the independent auditors
<PAGE>
of the Company for the year ending December 31, 2000; and (iii) with respect to
any other matters that may come before the meeting, as recommended by the Board
of Directors or, if no such recommendation is given, at their own discretion.
REVOCABILITY OF PROXIES
Any person giving a proxy may revoke the proxy at any time before its use
by delivering to the Company written notice of revocation or a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.
SOLICITATION
The cost of this solicitation will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for expenses incurred in forwarding solicitation
materials to such beneficial owners. Solicitation will be primarily by mailing
this Proxy Statement to all stockholders entitled to vote at the meeting. The
Company may reimburse brokers, banks and others holding shares in their names
for others for the cost of forwarding proxy materials and obtaining proxies from
beneficial owners. Proxies also may be solicited by certain of the Company's
directors and officers, personally or by telephone or facsimile, without
additional compensation.
ANNUAL REPORT AND OTHER MATTERS
The 1999 Annual Report to Stockholders, which was mailed to stockholders
with or preceding this Proxy Statement, contains financial and other information
about the activities of the Company, but is not incorporated into this Proxy
Statement and is not to be considered a part of these proxy soliciting
materials. The information contained in the "Compensation Committee's Report on
Executive Compensation", "Audit Committee Report" and "Performance Graph" below
shall not be deemed "filed" with the Securities and Exchange Commission (the
"SEC") or subject to Regulations 14A or 14C or to the liabilities of Section 18
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company will provide upon written request, without charge to each
stockholder of record as of the Record Date, a copy of the Company's annual
report on Form 10-KSB for the year ended December 31, 1999 as filed with the
SEC. Any exhibits listed in the Form 10-KSB report also will be furnished upon
request at the actual expense incurred by the Company in furnishing such
exhibit. Any such request should be directed to the Company's Secretary at the
Company's executive offices at 2901 East Camelback Road, Phoenix, Arizona,
85016.
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INFORMATION CONCERNING DIRECTORS AND CORPORATE OFFICERS
The names, ages, and certain information concerning the Company's current
directors and corporate officers are set forth below.
Name Age Position
---- --- --------
Donald R. Head 61 Chairman of the Board; Chief Executive
Officer
Milton M. Ferrantelli 51 Executive Vice President
Dale A. Head 64 Executive Vice President; Secretary
Michael J. Benjamin 38 Vice President; Corporate Controller
Deborah L. Campbell 42 Vice President
Mark C. Walker 39 Vice President; Chief Financial Officer;
Treasurer
Richard A. Alexander 54 Director
David C. Dewar 37 Director
Theo F. Lamb 57 Director
Robert B. Liverant 70 Director
Stephen A McConnell 47 Director
Ben T. Morris 53 Director
DONALD R. HEAD is a co-founder of the Company's wholly-owned operating
subsidiary, Capital Title Agency, Inc. ("Capital Title") and has served as its
Chairman of the Board since its inception in 1981. Mr. Head is also the Chairman
of the Board and Chief Executive Officer of the Company. Mr. Head co-founded
Centurian Development and Investments, Inc., a custom designer and builder of
residential homes, and is also a partner in America West Capital One LLC, a
residential real estate developer in Yavapai County, Arizona. Mr. Head has
previously served as a board member for both U.S. and Canadian public companies.
He graduated from Arizona State University with a BA in Business and holds a law
degree from the University of Arizona.
MILTON M. FERRANTELLI joined Capital Title in November 1997 as a Vice
President and as Assistant to the Chairman of Capital Title's Maricopa County,
Arizona operations. In February 1998, Mr. Ferrantelli was appointed Executive
Vice President of the Company and President of the Company's Arizona title and
escrow operations. Prior to joining the Company, Mr. Ferrantelli purchased
United Title Insurance Agency in 1986 with two active partners and served as its
President and Chief Executive Officer, prior to its acquisition by Norwest
Financial in 1994. Mr. Ferrantelli has over twenty years of experience in the
title and escrow industry in the Arizona marketplace. He holds a BA from Arizona
State University and has completed post-graduate work.
DALE A. HEAD joined Capital Title Group, Inc. as Executive Vice President
and General Counsel in October 1998. He has served as General Counsel for
Capital Title Agency, a wholly owned subsidiary of Capital Title Group, Inc.,
since 1982. Mr. Head has over thirty five years legal expertise that includes
general civil practice in state and federal courts, commercial and real estate,
and corporate and business litigation in the state of Arizona. Mr. Head
completed his undergraduate education at Arizona State University and received
his L.L.B. Degree from the University of Arizona. He is currently a member of
the Arizona State Bar.
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MICHAEL J. BENJAMIN joined Capital Title in November 1996 as a Vice
President and serves as the Corporate Controller. Prior to joining the Company,
Mr. Benjamin was employed by Semple & Cooper, PLC. Mr. Benjamin was an Audit
Manager with Semple & Cooper, PLC from 1995 to 1996. He is a graduate of Florida
Atlantic University with a BA in Accounting and is a Certified Public
Accountant.
DEBORAH L. CAMPBELL is a Vice President of Capital Title. Ms. Campbell has
been employed by Capital Title for more than 14 years, most recently as Director
of Human Resources and has held various positions, including serving as a trust
officer and overseeing all compliance regulations.
MARK C. WALKER has served as Vice President and Chief Financial Officer of
the Company since March 1998. Prior thereto, Mr. Walker had served as Vice
President and Chief Financial Officer of Main Street and Main Incorporated, a
publicly traded company, since February 1993. From July 1988 to February 1993,
Mr. Walker was Controller of the OEM Division of Executone Information Systems,
Inc. He is a graduate of the University of Northern Iowa and is a Certified
Public Accountant.
RICHARD A. ALEXANDER joined the Company as Director in January 1999. Since
September 1996, he has served as President, Sales and Marketing, of GE Capital
Residential Connections Corporation, a unit of GE Capital Mortgage Corporation,
which is a part of GE Capital, a diversified financial service company. Prior
thereto, Mr. Alexander was President and General Manager of United General
Information Services, and Executive Vice President of United General Financial
Services, Inc. He previously served as Division President for TRW's Real Estate
Loan Services Division taking the start-up company to over $200 million in
revenue in five years. He also served as President and Chief Executive Officer
of TRW Title Insurance where he structured the acquisition of three title
insurance underwriting companies growing revenue from $40 million to over $320
million.
DAVID C. DEWAR has been a Director of Capital Title Group since August
1997. Mr. Dewar is the President and Chief Executive Officer of Magellan
Corporations, a fully integrated real estate organization that provides
comprehensive investment management services. Mr. Dewar is a graduate of Ryerson
University in Toronto, Canada, where he received a Bachelor of Technology degree
in Architecture and Project Management and a diploma in Economics.
THEO F. LAMB is a co-founder of Capital Title Agency, Inc. and has served
as a Director of Capital Title since its inception in 1981. Mr. Lamb has been a
Director of the Company since May 1996. He is the owner of Lamb Chevrolet, Inc.
in Prescott, Arizona, a retail car dealership for Cadillac, Oldsmobile,
Chevrolet, Subaru and Nissan automobiles. He has served as a member of the
Chevrolet and Subaru National Dealer Counsels and was elected to the Regional
Dealer Counsels for Oldsmobile and Cadillac. He was the managing partner in
several land and commercial property developments in the Prescott area. Mr. Lamb
is a graduate of Southern Methodist University holding a BS degree in Business.
ROBERT B. LIVERANT has been a Director of the Company since May 1996. Mr.
Liverant is a retired Chartered Accountant who was a Senior Partner in the Firm
of Liverant Yip and Co. in British Columbia for 20 years, specializing in audits
of public companies. Mr. Liverant was also a partner in the firm of Smythe
Ratcliffe and Associates and a member of the firm of Pannell Kerr Forester, an
international accounting firm. Mr. Liverant has several real estate investments.
He has served as a director of more than 15 Canadian public companies. Mr.
Liverant holds a BA degree with an economics major from the University of
British Columbia.
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STEPHEN A MCCONNELL has been a Director of the Company since September
1996. He is the President of Solano Ventures, a firm involved in private capital
investments. He is currently Chairman of G-L Industries, LLC, a Salt Lake
city-based manufacturer of wood glu-lam beams used in the construction industry.
He has served, between 1991 and 1997, as Chairman of the Board and majority
stockholder in Mallco Lumber & Building Materials, Inc., a wholesale distributor
of construction lumber and doors. From 1991 to 1995, Mr. McConnell was President
of Belt Perry Associates, Inc., a property tax appeal firm. He was President and
Chief Executive Officer of N-W Group, Inc., a publicly held corporation, from
1985 through 1991. Mr. McConnell presently serves on the boards of Vodavi
Technologies, Inc., Mobile Mini, Inc. and JDA Software Group, Inc. Mr. McConnell
holds a BA from Harvard College and an MBA from Harvard Business School.
BEN T. MORRIS has been a director of the Company since May 1998. He is a
Director of Pinnacle Global Group, a financial services firm, and is President
and CEO of Sanders Morris Harris, its largest wholly owned subsidiary. Sanders
Morris Harris is a market maker for the Company's Common Stock and acted as
placement agent for the Company's $5.0 million private placement in April 1999.
He is also a director of American Equity Investment Life Holding Company. Mr.
Morris served as Chief Operating Officer of Tatham Corporation from 1980 until
1984. Prior thereto, he was employed by Mid American Oil Company from 1973 until
1980, serving as Chief Financial Officer until 1979 and as President in 1979 and
1980. Mr. Morris has a BBA from the University of North Texas.
There are no family relationships among any of the Directors.
MEETINGS OF THE BOARD OF DIRECTORS. During the year ended December 31,
1999, the Board of Directors of the Company met on four occasions. Each of the
Directors attended 75% or more of the meetings of the Board of Directors and of
the meetings held by such committees of the Board on which he served.
AUDIT COMMITTEE. The Audit Committee, which has adopted a formal written
charter, makes recommendations to the Board concerning the selection of outside
auditors, reviews the financial statements of the Company and considers such
other matters in relation to the internal controls and external audit of the
financial affairs of the Company as may be necessary or appropriate in order to
facilitate accurate and timely financial reporting. The Audit Committee,
currently comprised of Richard A. Alexander, Robert B. Liverant and Stephen A
McConnell, held three meetings in 1999 and believes it satisfied its
responsibilities during the past year in compliance with its charter.
COMPENSATION COMMITTEE. The Compensation Committee, which was formed on
April 8, 1997, reviews all aspects of compensation of executive officers of the
Company and makes recommendations on such matters to the full Board of
Directors. The Compensation Committee, comprised of Theo F. Lamb, David C. Dewar
and Ben T. Morris held one meeting during 1999. All current committee members
are expected to be nominated for re-election at a Board meeting to be held
following the Annual Meeting of Shareholders.
COMPENSATION OF DIRECTORS
Effective as of March 1998, non-employee directors began receiving a fee of
$500 per month, which was increased to $1,000 per month effective March 1999. In
addition, non-employee directors are entitled to receive regular stock option
grants under the Directors Plan and to receive reimbursement for reasonable
expenses incurred in attending board meetings.
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EXECUTIVE COMPENSATION
The following table summarizes all compensation paid to the Company's Chief
Executive Officer and the Company's other four most highly compensated executive
officers (the "Named Executive Officers") who received salary and bonus in
excess of $100,000 for services rendered to the Company during the years ended
December 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------- Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation Awards Options Payouts Compensation(2)
------------------ ---- ------ ----- ------------ ------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald R. Head, 1999 $200,000 $ 3,792 $ -0- -0- -0- $ -0- $ 9,600
Chairman of the Board and 1998 191,538 76,807 -0- -0- -0- -0- 10,400
Chief Executive Officer 1997 121,240 -0- -0- -0- -0- -0- 0
Andrew A. Johns, 1999 207,824 13,569 -0- -0- -0- -0- 8,633
President(1) 1998 129,750 43,996 -0- -0- -0- -0- 10,319
Milton M. Ferrantelli, 1999 132,000 101,000 -0- -0- -0- -0- 8,438
Executive Vice President 1998 131,000 47,999 -0- -0- -0- -0- 5,200
Dale A. Head, Executive 1999 150,000 2,320 -0- -0- -0- -0- 7,500
Vice President
Mark C. Walker, Vice 1999 120,000 1,855 -0- -0- -0- -0- 6,300
President, CFO and
Treasurer
</TABLE>
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(1) Mr. Johns retired as an officer and director of the Company effective
November 30, 1999.
(2) Includes car allowance and the Company's contribution to the 401(k) plan.
The Company did not grant stock options to any of the Named Executive
Officers during the last fiscal year.
AMENDMENT OR REPRICING OF OPTIONS
During the 1999 fiscal year, the Company did not amend or reprice any of
its stock options held by executive officers of the Company, with the exception
of options granted to Mr. Johns on May 23, 1996 to purchase 125,000 shares of
Common Stock for $1.00 per share. The term of Mr. Johns' options were extended
to September 1, 2003.
The following table sets forth certain information concerning each exercise
of stock options during the year ended December 31, 1999 by the Named Executive
Officers and the aggregated fiscal year-end value of the unexercised options of
such Named Executive Officers.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUE AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised Options In-the-Money Options at
Shares Value at Fiscal Year End (#) Fiscal Year End ($)(2)
Acquired Realized Upon ---------------------------- ----------------------------
Name on Exercise(#) Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Head -0- -0- 150,000 -0- $112,500 -0-
Andrew A. Johns (1) -0- -0- 125,000 -0- $ 93,750 -0-
Milton M. Ferrantelli -0- -0- 50,000 75,000 $ 37,500 $37,500
Dale A. Head -0- -0- 20,000 100,000 $ 15,000 -0-
Mark C. Walker -0- -0- -0- 100,000 -0- -0-
</TABLE>
- ----------
(1) Mr. Johns retired as an officer and director of the Company effective
November 30, 1999
(2) Based on the bid price of the Common Stock of $1.75 per share as reported
on the Nasdaq SmallCap Market on December 31, 1999.
STOCK OPTION PLANS
1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "1996 Plan") currently authorizes
the Board to grant options to employees of the Company to purchase up to an
aggregate of 3,900,000 shares of Common Stock. Officers and other employees of
the Company who, in the opinion of the Board of Directors, are responsible for
the continued growth and development and the financial success of the Company
are eligible to be granted options under the 1996 Plan. Options may be
non-qualified options, incentive stock options, or any combination of the
foregoing. In general, options granted under the 1996 Plan are not transferable
and expire five years after the date of grant. The per share exercise price of
an incentive stock option granted under the 1996 Plan may not be less than the
fair market value of the Common Stock on the date of grant. Incentive stock
options granted to persons who have voting control over 10% or more of the
Company's capital stock are granted with an exercise price of at least 110% of
the fair market value of the underlying shares on the date of grant. No option
may be granted after May 23, 2006.
The 1996 Plan provides the Board of Directors with the discretion to
determine when options granted thereunder will become exercisable. Unless
otherwise provided, 50% of the options granted may be exercised after two years
from the date of grant and the remaining 50% of the options may be exercised
after three years from the date of grant at any time prior to expiration, so
long as the optionee remains employed by the Company. No option granted under
the 1996 Plan is transferable by the optionee other than by will or the laws of
descent and distribution, and each option is exercisable during the lifetime of
the optionee only by the optionee.
As of March 1, 2000, the Board has authorized the grant under the 1996 Plan
of options to purchase 2,725,950 shares of Common Stock, with exercise prices
ranging from $1.00 to $3.63 per share.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Company also has a Non-Employee Directors Stock Option Plan (the
"Directors Plan"), under which only non-employee directors are eligible to
receive options. Options to purchase up to 600,000 shares are authorized for
issuance under the Directors Plan. As of March 1, 2000, options to purchase
496,000 shares of Common Stock have been granted under the Directors Plan at
exercise prices ranging from $1.00 to $4.00 per share. All options granted under
the Directors Plan will be subject to the same vesting schedule applicable to
options granted under the 1996 Plan. All options granted or to be granted under
the Directors Plan are non-qualified stock options.
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<PAGE>
Each non-employee director who joins the Board of Directors will
receive options to acquire 15,000 shares of the Company's Common Stock. In
addition to the foregoing option grants, each year, every non-employee director
automatically receives options to acquire 10,000 shares of the Company's Common
Stock on the third business day following the date the Company publicly
announces its annual financial results; provided that such director has attended
at least 75% of the meetings of the Board of Directors and of the Board
Committees of which such director is a member in the preceding fiscal year. The
exercise price of all options granted under the Directors Plan is the fair
market value of the Company's Common Stock on the date of grant.
No option granted under the Directors Plan is transferable by the optionee
other than by will or the laws of descent and distribution, and each option is
exercisable during the lifetime of the optionee only by the optionee.
EMPLOYMENT AGREEMENTS
DONALD R. HEAD. On June 1, 1996, Donald R. Head entered into an Employment
Agreement with the Company, which provides for his services as Chairman of the
Board and Chief Executive Officer (as subsequently amended and in effect on the
date hereof, the "Head Agreement"). The Head Agreement is for a five-year term
with an amended commencement date of April 1, 1998. The Agreement is extended
one additional year on the first anniversary after the commencement date, and on
each succeeding anniversary thereafter, subject to cancellation of any further
extensions on 60-day notices given prior to the next applicable anniversary
date. The Head Agreement may be terminated by the Company for cause, including
upon (i) conviction of a willful or intentional crime, (ii) absence from work
for more than 180 consecutive days and (iii) the material failure by Mr. Head to
perform his duties.
The Head Agreement currently provides for annual base salary of $200,000,
plus an annual bonus equal to 4% of the Company's audited pretax net profits on
all Company operations and reflecting certain adjustments, calculated according
to generally accepted accounting principles applicable to title insurance
agencies consistently applied but without giving effect to certain employee
bonus payments; provided, that the bonus amount shall not exceed 200% of base
salary as in effect on the date hereof. Such bonus shall be determined and paid
within three months following the end of each fiscal year. In addition, the Head
Agreement provides for a car allowance of $800 per month.
The Head Agreement provides that if Mr. Head's employment is terminated
without cause and for reasons other than death or disability or if Mr. Head
resigns for any reason during a two-year period following a Change-in-Control
(as defined in the Head Agreement) of the Company, the Company will pay Mr. Head
severance compensation in an amount equal to 300% of his annual base salary at
such time.
MILTON M. FERRANTELLI. On June 17, 1997, Milton M. Ferrantelli entered into
an Employment Agreement (the "Ferrantelli Agreement") with the Company. The
Ferrantelli Agreement was based on certain conditions which were met on November
10, 1997, the effective date of the Ferrantelli Agreement, which provides for
his services as Assistant to the Chairman of Capital Title Agency's Maricopa
County operations. The term of the Ferrantelli Agreement is through October
2004, and compensation thereunder is $132,000 per year plus additional
compensation, subject to various limits, equal to (i) three and one-third
percent of the Company's pretax income on operations in Maricopa County,
Arizona, plus (ii) five percent of Company's pretax income on operations in each
other Arizona county (not to exceed $10,000 for any such other county). In
addition, the Ferrantelli Agreement provides for a car allowance of $600 per
month.
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<PAGE>
DALE A. HEAD On June 19, 1998, Dale A. Head entered into an Employment
Agreement (the "D.A. Head Agreement") with the Company. The term of the D.A.
Head Agreement is through September 2003 and compensation thereunder is $150,000
per year plus a car allowance of $500 per month.
MARK C. WALKER On March 7, 1998, Mark C. Walker entered into an Employment
Agreement (the "Walker Agreement") with the Company. The term of the Walker
Agreement is through March 2004 and compensation thereunder is $120,000 per year
plus a car allowance of $500 per month.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS OR FUTURE FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934 THAT MIGHT INCORPORATE BY REFERENCE THIS INFORMATION
STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORTS AND THE PERFORMANCE GRAPH
WHICH FOLLOWS SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY SUCH
FILINGS.
COMPENSATION PHILOSOPHY
Decisions on compensation of the Company's executive officers are made by
the Compensation Committee of the Board of Directors. The Compensation
Committee, which is responsible for setting and administering the policies that
govern both annual compensation and stock ownership programs, held one meeting
during 1999. In general, the compensation policies and practices are based upon
the following subjective principles:
- - Compensation programs should reflect and promote the Company's goals and
reward individuals for contributions to the Company's success in achieving
its goals.
- - Compensation should be related to the value created for the Company's
stockholders.
- - Compensation programs should integrate both the long- and short-term
strategies of the Company.
- - Compensation programs should provide incentive for excellence in individual
performance and promote teamwork among the Company's management.
- - Compensation programs should be designed to attract and retain executives
critical to the success of the Company.
- - Stock ownership by management and stock-based compensation plans are
beneficial in aligning management's and the stockholders' interest in the
enhancement of stockholder value.
Total compensation for each member of senior management is set at levels
which the Compensation Committee believes are competitive in relation to
companies of similar type and size; however, no independent investigation of
such levels has been conducted by the Compensation Committee. The components of
executive compensation include base salary, equity participation in the Company
in the form of options to purchase common stock, and a bonus program. Due to the
level of compensation received by the executive officers of the Company, the
Compensation Committee has not yet deemed it necessary to adopt a policy
regarding the one million dollar cap on deductibility of certain executive
compensation under Section 162(m) of the Internal Revenue Code.
9
<PAGE>
BASE SALARY
The Compensation Committee establishes base salaries for the Company's
executive officers at levels considered appropriate in light of the duties and
scope of responsibilities of each officer's position. In this regard, the
Compensation Committee considers the compensation practices and corporate
financial performance of similarly situated companies. In evaluating base salary
levels, the Compensation Committee takes into account a number of factors,
including (but not limited to) management's efforts to improve levels of sales
and profitability and to expand the Company's markets. The Compensation
Committee also takes into account management's consistent commitment to the
long-term success of the Company through the development of new operations and
through implementing strategic business acquisition opportunities.
Based upon its evaluation of these factors, the Compensation Committee
believes that senior management is dedicated to achieving long-term financial
improvements, and that the compensation policies, plans and programs
administered by the Compensation Committee contribute to management's
commitment. The Compensation Committee attempts to assimilate all of the
foregoing factors when it renders its compensation decisions; however, the
Compensation Committee recognizes that its decisions are primarily subjective in
nature due to the subjective nature of the criteria. The Compensation Committee
does not assign any specified weight to the criteria it considers.
Base salary recommendations are fixed at levels which the Compensation
Committee believes is paid to management with comparable qualifications,
experience and responsibilities at other corporations of similar size engaged in
businesses similar to that of the Company.
STOCK OPTIONS
The Compensation Committee administers the Company's 1996 Stock Option Plan
(the "1996 Plan") and through a management committee comprised of Mr. Head and
Mrs. Campbell determines those employees of the Company who are eligible to
participate in the 1996 Plan. The exercise price of options granted under the
1996 Plan is never less than the fair market value of the Company's Common Stock
on the day of grant. The number of options granted by the Compensation Committee
under the 1996 Plan are based upon the Compensation Committee's evaluation of
the same factors described above under "Base Salary." The Compensation Committee
also takes into account the relative scope of accountability and the anticipated
performance requirements and contributions of each participating employee, as
well as each participating employee's current equity participation in the
Company. During the fiscal year ending December 31, 1999, options to purchase up
to 839,950 shares of common stock pursuant to the 1996 Plan were granted to
various employees of the Company and its subsidiaries.
BONUS COMPENSATION
Certain officers have employment agreements with the Company that provide
for the payment of bonus compensation in amounts determined based on Company
profitability. The Compensation Committee also makes discretionary bonus
payments to officers and employees. Determinations of the Compensation Committee
with regard to the award of discretionary bonus compensation are generally based
upon the Compensation Committee's evaluation of the same factors described above
under "Base Salary" and other subjective criteria.
10
<PAGE>
CHIEF EXECUTIVE OFFICER
Mr. Head has served as Chairman of the Board and Chief Executive Officer of
the Company since its inception. As Chief Executive Officer, Mr. Head receives a
base salary and is eligible to receive stock options under the 1996 Plan and is
eligible to receive bonus compensation pursuant to a formula set forth in the
Head Agreement described above. The Compensation Committee's evaluation process
with respect to the Chief Executive Officer's compensation is comprised of the
same components that are utilized by the Compensation Committee in evaluating
the compensation of other members of senior management.
Submitted by the Capital Title Group, Inc.
Compensation Committee of the Board of Directors
David C. Dewar
Theo F. Lamb
Ben T. Morris
AUDIT COMMITTEE REPORT
The Audit Committee, which has adopted a formal written charter, makes
recommendations to the Board concerning the selection of outside auditors,
reviews the financial statements of the Company and considers such other matters
in relation to the internal controls and external audit of the financial affairs
of the Company as may be necessary or appropriate in order to facilitate
accurate and timely financial reporting. The Audit Committee held three meetings
in 1999 and believes it satisfied its responsibilities during the past year in
compliance with its charter.
The Audit Committee has reviewed the 1999 audited financial statements with
management and the independent auditors and has recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report and Form 10-KSB. The Audit Committee has discussed with the
independent auditors the matters required to be discussed by Statement of
Auditing Standards No. 61 and have received written disclosure regarding the
independent accountant's independence.
Submitted by the Capital Title Group, Inc.
Audit Committee of the Board of Directors
Richard A. Alexander
Robert B. Liverant
Stephen A McConnell
11
<PAGE>
STOCK PRICE PERFORMANCE
Set forth below is a line graph comparing the cumulative total return of
the Company's Common Stock with the cumulative total return of the Nasdaq Stock
Market Index (U.S.) and a peer group of companies engaged in the title insurance
industry (SIC codes 6360 - 6369) for the period from May 15, 1997 through
December 31, 1999 (including the reinvestment of dividends, if any). The
following graph assumes a $100 investment on May 15, 1997. Price data for the
Company's Common Stock is based on the closing bid price for the relevant
measurement dates as reported by the Nasdaq Small Cap Market for 1998 and 1999
and prior to that by the OTC Bulletin Board (which quotations represent prices
between dealers and do not include retail markup, markdown or commissions and
may not reflect actual transactions). The performance graph below shall not be
deemed incorporated by reference by any general statement incorporating this
Proxy Statement by reference into any filing under, and shall not otherwise be
deemed filed under, either the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent that the Company specifically incorporates
this information by reference.
[PERFORMANCE GRAPH]
5/15/97 12/31/97 12/31/98 12/31/99
------- -------- -------- --------
Capital Title Group, Inc. $100 $ 52 $112 $ 58
Nasdaq Stock Market - U.S. Companies $100 $118 $165 $300
Peer Group: SIC Codes 6360 - 6369
(Title Insurance) $100 $160 $201 $128
12
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of March 15, 2000, the beneficial
ownership of shares of Common Stock of the Company by (i) each person known by
the Company to beneficially own more than 5% of the Company's Common Stock, (ii)
each Director, (iii) each Named Executive Officer and (iv) all Directors and
executive officers of the Company as a group. This information was determined in
accordance with Rule 13 (d)-3 under the Securities Exchange Act of 1934, as
amended, and is based upon the information furnished by the persons listed
below. Except as otherwise indicated, each shareholder listed possesses sole
voting and investment power with respect to the shares indicated as being
beneficially owned.
Number of Shares Percent of
Name and Address (1) Beneficially Held Ownership (2)
- -------------------- ----------------- -------------
Donald R. Head (3) 2,525,085 (4)(5)(6) 14.8%
Milton M. Ferrantelli 62,500 (7) 0.4%
Dale A. Head 139,518 (4)(8) 0.8%
Michael J. Benjamin 25,000 (9) 0.1%
Deborah L. Campbell 25,000 (9) 0.1%
Mark C. Walker 51,000 (10) 0.3%
Richard A. Alexander 200,000 (6) 1.2%
David C. Dewar 82,500 (11) 0.5%
Theo F. Lamb 2,268,723 (6)(12)(13) 13.3%
Robert B. Liverant 140,000 (13) 0.8%
Stephen A McConnell 127,037 (13) 0.7%
Ben T. Morris 59,537 (14) 0.4%
All directors and executive
officers as a group (12 persons) 5,405,900 31.0%
- ----------
(1) Mailing Address of each beneficial owner is c/o Capital Title Group, Inc.,
2901 East Camelback Road, Phoenix, Arizona 85016.
(2) The percentages shown include the shares of Common Stock actually owned as
of March 15, 2000 and the shares of Common Stock that the person or group
had the right to acquire within 60 days of such date. In calculating the
percentage of ownership, all shares of Common Stock that the identified
person or group had the right to acquire within 60 days of March 15, 2000
upon the exercise of options or warrants are deemed to be outstanding for
the purpose of computing the percentage of the shares of Common Stock owned
by such person or group, but are not deemed to be outstanding for the
purpose of computing the percentage of the shares of Common Stock owned by
any other person.
(3) Shares beneficially held in The Head Revocable Trust Dated April 1, 1975.
(4) Mr. Don Head has granted an option to Mr. Dale Head to purchase 200,000
shares of Common Stock at $1.00 per share. This option may be exercised as
to not exceed 100,000 of the option shares not earlier than February 15,
2002, and as to the remaining shares, not later than February 15, 2005. The
100,000 vested shares underlying this option were included for Mr. Dale
Head in computing his percentage of ownership.
(5) Includes options to purchase 150,000 shares of Common Stock, for $1.00 per
share.
(6) During 1999, Mr. Don Head and Mr. Theo Lamb each granted an option to Mr.
Richard Alexander to purchase 100,000 shares of Common Stock at $3.00 per
share expiring three years from the date of grant. The shares underlying
this option have been included for Mr. Head, Mr. Lamb and Mr. Alexander in
computing their percentage of ownership, but were only included once in
computing the percentage ownership of all directors and officers as a
group.
(7) Includes options to purchase 62,500 shares of Common Stock, for $1.00 per
share.
(8) Includes options to purchase 20,000 shares of Common Stock, for $1.00 per
share.
(9) Includes options to purchase 25,000 shares of Common Stock, for $1.00 per
share.
(10) Includes options to purchase 50,000 shares of Common Stock, for $2.00 per
share.
(11) Includes options to purchase 12,500 shares of Common Stock, for a weighted
average of $1.40 per share.
(12) Includes warrants to purchase 10,000 shares of Common Stock, for $2.50 per
share.
(13) Includes options to purchase 30,000 shares of Common Stock, for a weighted
average of $1.17 per share.
(14) Includes options to purchase 7,500 shares of Common Stock, for $2.50 per
share. Excludes warrants to purchase 308,642 shares of Common Stock for
$1.63 per share issued to Sanders Morris Harris in connection with a
private placement in April 1998. Mr. Morris is a principal with Sanders
Morris Harris, which is also a market maker for the Company's Common Stock.
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal years 1998 and 1997, the Company paid $55,866 and $41,260
respectively, to Dale A. Head for legal services performed by his firm. Dale A.
Head is Donald R. Head's brother. Mr. Dale A. Head has discontinued his private
law practice and has served as the Company's Executive Vice President, Corporate
General Counsel and Secretary since October 1998.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Executive officers, directors and greater than 10% stockholders are
also required to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that all filing requirements applicable to its executive officers, directors,
and greater than ten-percent beneficial owners were complied with during the
fiscal year ending December 31, 1999.
PROPOSAL NUMBER ONE:
ELECTION OF DIRECTORS
The Board of Directors currently consists of seven members and is divided
into three classes, with the terms of two directors ("Class 3 Directors")
expiring at the Annual Meeting, the terms of three directors ("Class 1
Directors") expiring at the 2001 annual meeting of stockholders and the terms of
two directors ("Class 2 Directors") expiring at the 2002 annual meeting of
stockholders. Each class of directors up for election each year will be elected
for a three-year term. Accordingly, the terms of one class of directors, or
approximately one-third of the Company's directors, expires each year.
Robert B. Liverant and Stephen A McConnell have been nominated for election
as Class 3 Directors. If elected, their terms will expire at the 2003 annual
meeting of stockholders. Biographical information regarding each of these
nominees is set forth elsewhere in this Proxy Statement.
If any nominee should become unavailable for any reason, which the Board of
Directors does not anticipate, the proxy will be voted for any substitute
nominee or nominees who may be selected by the Board of Directors prior to or at
the Annual Meeting, or, if no substitute is selected by the Board of Directors
prior to or at the Annual Meeting, for a motion to reduce the present membership
of the Board to the number of nominees available and to create an additional
vacancy to be filled by the Board of Directors.
The election of the director nominees will require the affirmative vote of
a plurality of the votes cast by the stockholders present at the meeting and
entitled to vote. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR ELECTION OF EACH OF THE FOREGOING NOMINEES.
14
<PAGE>
PROPOSAL NUMBER TWO:
RATIFICATION OF SELECTION OF
INDEPENDENT ACCOUNTANTS
The Company has appointed Ernst & Young LLP ("E&Y") as its independent
auditors and principal accountants for the fiscal year ending December 31, 2000.
E&Y served as the Company's independent auditors and principal accountants for
the fiscal years ending December 31, 1997, 1998 and 1999.
A representative of E&Y will attend the Annual Meeting for the purpose of
responding to appropriate questions and will be afforded an opportunity to make
a statement if they so desire.
The affirmative vote of a majority of the shares of Common Stock present or
represented by valid proxy and entitled to vote at the Annual Meeting will be
required to ratify the selection of E&Y as the Company's independent auditors
and principal accountants for the fiscal year ending December 31, 2000. THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
RATIFICATION OF E&Y AS INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to present any proposal for stockholder action
at the next Annual Meeting of Stockholders to be held in 2001, must be received
by the Company's Secretary, at the Company's offices, not later than December 2,
2000, in order to be included in the Company's proxy statement and form of proxy
for that meeting. Such proposals should be addressed to the Corporate Secretary,
Capital Title Group, Inc., 2901 East Camelback Road, Phoenix, Arizona 85016. If
a shareholder proposal is introduced at the 2001 Annual Meeting of Stockholders
without any discussion of the proposal in the Company's proxy statement, and the
stockholder does not notify the Company on or before February 15, 2001, as
required by SEC Rule 14(a)-4(c)(1), of the intent to raise such proposal at the
Annual Meeting of Stockholders, then proxies received by the Company for the
2001 Annual Meeting of Stockholders will be voted by the persons named as such
proxies in their discretion with respect to such proposals. Notice of such
proposal is to be sent to the above address.
OTHER MATTERS
The Annual Meeting is being held for the purposes set forth in the Notice
that accompanies this Proxy Statement. The Board of Directors is not presently
aware of any business to be transacted at the Annual Meeting other than as set
forth in such Notice. However, if other matters properly come before the
meeting, the persons named in the accompanying proxy intend to vote as
recommended by the Board of Directors or, if no such recommendation is given, in
accordance with their own discretion.
1999 ANNUAL REPORT ON FORM 10-KSB
The Company files annual reports on Form 10-KSB with the SEC. A copy of the
annual report for the fiscal year ended December 31, 1999 may be obtained, free
of charge, upon written request by any stockholder to Capital Title Group, Inc.,
2901 East Camelback Road, Phoenix, Arizona 85016, Attention: Stockholder
Relations.
By Order of the Board of Directors
Donald R. Head
March 22, 2000 Chairman of the Board
<PAGE>
[FRONT OF CARD]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CAPITAL TITLE GROUP, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of CAPITAL TITLE GROUP, INC., a Delaware corporation
(the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement of the Company, each dated March 22, 2000, and
hereby appoints Donald R. Head and Mark C. Walker, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 2000 Annual Meeting
of Stockholders of the Company, to be held on Tuesday, May 16, 2000, at 2:00
p.m., MST, at the offices of The Miller Group, 4909 East McDowell Road, Phoenix,
Arizona and at any adjournment or adjournments thereof, and to vote all shares
of Common Stock that the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below:
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
(except as indicated) nominees listed below:
If you wish to withhold authority to vote for any individual nominees,
strike a line through that nominee's name in the list below:
Robert B. Liverant Stephen A McConnell
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG, L.L.P. AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and upon such matter or matters that may properly come before the meeting or
any adjournment or adjournments thereof.
(Continued and to be signed on reverse side)
<PAGE>
[REVERSE OF CARD]
(Continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS; FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG, LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY;
AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
A majority of such attorneys or substitutes as shall be present and shall act at
said meeting or any adjournment or adjournments thereof (or if only one shall be
present and act, then that one) shall have and may exercise all of the powers of
said attorney-in-fact hereunder.
(This Proxy should be dated, signed by
the stockholder(s) exactly as his or her
name appears heron, and returned
promptly in the enclosed envelope.
Persons signing in a fiduciary capacity
should so indicate. If shares are held
by joint tenants or as community
property, both stockholders should
sign.)
Dated: , 2000
--------------------------
----------------------------------------
(Signature)
----------------------------------------
(Signature if jointly held)
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
