<PAGE>
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
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CAPITAL HOLDING CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
R. MICHAEL SLAVEN
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] 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:
------------------------------------------------------------------------
Set forth the amount on which the filing fee is calculated and state how it
was determined.
[_] 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:
------------------------------------------------------------------------
Notes:
<PAGE>
NOTICE OF 1994
ANNUAL MEETING OF
STOCKHOLDERS AND
PROXY STATEMENT
<PAGE>
Dear Stockholder:
I'm pleased to invite you to attend Capital Holding Corporation's Annual
Meeting of Stockholders at 11:00 a.m. on Wednesday, May 11, 1994, in the
Regency Ballroom of the Hyatt Regency Louisville, 320 West Jefferson Street,
Louisville, Kentucky.
The matters we'll discuss at the meeting are described in detail in the
following notice of the meeting and our proxy statement. I urge you to sign and
promptly return the enclosed proxy card to ensure that your stock is
represented at the meeting. You need not attach postage if you mail the card in
the United States. If you attend the meeting, you may withdraw your proxy and
vote your stock in person.
If you have any questions or comments about matters discussed in the proxy
statement or the operation of your company, we'd be happy to hear from you.
Please call our Shareholder Relations Department, collect, at (502) 560-2391.
We look forward to seeing you at the Annual Meeting in Louisville.
Sincerely,
LOGO
Irving W. Bailey II
Chairman, President and Chief Executive Officer
March 31, 1994
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Capital Holding Corporation (the
"Company") will be held at 11:00 a.m. Eastern Daylight Time on Wednesday, May
11, 1994, in the Regency Ballroom of the Hyatt Regency Louisville, 320 West
Jefferson Street, Louisville, Kentucky.
The purposes of the meeting will be to:
(1) Elect four directors;
(2) Consider and act upon a proposal to amend the Company's Certificate of
Incorporation to change the name of the Company;
(3) Consider and act upon a proposal to amend the Company's 1989 Stock Option
Plan;
(4) Consider and act upon a proposal to amend the Company's Certificate of
Incorporation to create a class of preference stock;
(5) Consider and act upon a proposal to ratify the appointment of independent
auditors; and
(6) Transact any other business that may properly come before the meeting.
While only stockholders of record who own Capital Holding common stock at the
close of business on March 14, 1994, will be entitled to vote at the meeting,
all stockholders are invited to attend.
By Order of the Board of Directors
ROBERT MICHAEL SLAVEN
Secretary
CAPITAL HOLDING CORPORATION
Louisville, Kentucky
March 31, 1994
<PAGE>
CAPITAL HOLDING CORPORATION
400 WEST MARKET STREET
LOUISVILLE, KENTUCKY 40202
PROXY STATEMENT
PROXY SOLICITATION AND VOTING RIGHTS
The Board of Directors of Capital Holding Corporation (the "Company") is
soliciting proxies to be voted at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at 11:00 a.m. on Wednesday, May 11, 1994, in the
Regency Ballroom of the Hyatt Regency Louisville, 320 West Jefferson Street,
Louisville, Kentucky, and at any adjournment thereof. The Company is first
sending this proxy statement and accompanying proxy to stockholders on or about
April 1, 1994.
VOTING RIGHTS
The Board of Directors has fixed the close of business on March 14, 1994, as
the record date for determining stockholders entitled to receive notice of, and
to vote at, the Annual Meeting ("Record Date"). On the Record Date, there were
100,509,816 shares of the Company's common stock, par value $1 per share (the
"Common Stock") outstanding. For each share of Common Stock held on the Record
Date, a stockholder is entitled to one vote on each matter to be voted upon at
the Annual Meeting. A majority of such shares of Common Stock present in person
or by proxy will constitute a quorum for the transaction of business at the
Annual Meeting.
Each share of Common Stock represented at the Annual Meeting by a properly
executed proxy will be voted according to the instructions indicated on the
proxy. IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES OF COMMON STOCK WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR AND FOR THE PROPOSALS
CONTAINED IN THIS PROXY STATEMENT. A stockholder may revoke a proxy by voting
at the meeting, giving written notice of revocation to the Secretary of the
Company, or submitting a later-dated proxy at any time before the voting.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by the
inspectors of election appointed for the meeting, who also will determine
whether or not a quorum is present. The inspectors of election 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.
The Company will bear the expense of soliciting proxies. In addition to the use
of the mails, proxies may be solicited personally, by telephone or other means
of communication. The Company has retained Georgeson & Company, Inc., to help
solicit proxies for an estimated fee of $8,500 plus out-of-pocket costs and
expenses.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Record Date, the Company knew of no person who beneficially owned
more than five percent of any class of the Company's voting securities.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The number of shares of Common Stock owned by each director or nominee, each of
the executive officers named in the Summary Compensation Table in this Proxy
Statement, and directors, nominees and executive officers as a group, as of the
Record Date, is shown in the following table.
<TABLE>
<CAPTION>
Name of
director,
nominee
or executive Number
officer of
or number in shares
group owned/1/
- ------------------------------------------------------------
<S> <C>
Lee Adrean 28,447/2/
Irving W. Bailey II 378,398/3/
John L. Clendenin 1,680
John M. Cranor III 3,352
Joseph F. Decosimo 11,080
Lyle Everingham 332
Raymond V. Gilmartin 332
J. David Grissom 23,821
Watts Hill Jr. 46,220
Frederick C. Kessell 39,092/4/
F. Warren McFarlan 4,354
Shailesh J. Mehta 35,290/5/
Martha R. Seger 332
Florence R. Skelly 1,132
Larry D. Thompson 150
Joseph M. Tumbler 78,442/6/
John L. Weinberg 24,278
Directors and executive officers as a group (22) 742,746/7/
- ------------------------------------------------------------
</TABLE>
/1/Except for officers who have been granted options under the Company's stock
option plans, no director, nominee or officer currently has any right to
acquire Common Stock through the exercise of options, warrants, stock rights
or conversion privileges. Unless stated otherwise, sole voting and investment
powers are held by the owners named.
/2/Includes 5,767 shares directly held by Mr. Adrean; 995 shares held in Mr.
Adrean's account under the Company's Thrift Savings Plan over which Mr. Adrean
holds limited investment power; 1,951 shares held in Mr. Adrean's account
under the Company's Stock Ownership Plan subject to vesting requirements set
forth in footnote 3 to the Summary Compensation Table in this Proxy Statement,
and 19,734 shares which Mr. Adrean has the right to acquire pursuant to stock
options exercisable within 60 days of the Record Date.
/3/Includes 135,219 shares directly held by Mr. Bailey; 6,693 shares held in
Mr. Bailey's account under the Company's Thrift Savings Plan over which Mr.
Bailey holds limited investment power; 7,205 shares held in Mr. Bailey's
account under the Company's Stock Ownership Plan subject to the vesting
requirements set forth in footnote 3 to the Summary Compensation Table, and
229,281 shares which Mr. Bailey has the right to acquire pursuant to stock
options exercisable within 60 days of the Record Date.
/4/Includes 9,013 shares directly held by Mr. Kessell; 2,365 shares held in Mr.
Kessell's account under the Company's Thrift Savings Plan over which Mr.
Kessell holds limited investment power; 2,513 shares held in Mr. Kessell's
account under the Company's Stock Ownership Plan subject to the vesting
requirements set forth in footnote 3 to the Summary Compensation Table, and
25,201 shares which Mr. Kessell has the right to acquire pursuant to stock
options exercisable within 60 days of the Record Date.
/5/Includes 9,034 shares directly held by Mr. Mehta; 567 shares held in Mr.
Mehta's account under the First Deposit Corporation 401(k) Plan over which Mr.
Mehta holds limited investment power; and 24,022 shares held in Mr. Mehta's
account under the Company's Stock Ownership Plan subject to vesting
requirements set forth in footnotes 3 and 8 to the Summary Compensation Table,
and 1,667 shares which Mr. Mehta has the right to acquire pursuant to stock
options exercisable within 60 days of the Record Date.
/6/Includes 12,485 shares directly held by Mr. Tumbler; 4,389 shares held in
Mr. Tumbler's account under the Company's Thrift Savings Plan over which Mr.
Tumbler holds limited investment power; 2,957 shares held in Mr. Tumbler's
account under the Company's Stock Ownership Plan subject to the vesting
requirements set forth in footnote 3 to the Summary Compensation Table, and
58,611 shares which Mr. Tumbler has the right to acquire pursuant to stock
options exercisable within 60 days of the Record Date.
/7/Includes 240,031 shares beneficially owned by all executive officers, of
which 18,673 shares are held in such officers' accounts under certain tax-
qualified defined contribution plans over which they hold limited investment
power; and of which 22,662 shares are held in such officers' accounts under
the Company's Stock Ownership Plan subject to the vesting requirements set
forth in footnote 3 to the Summary Compensation Table; and includes 385,652
shares that the same group of officers has the right to acquire pursuant to
stock options exercisable within 60 days of the Record Date. Such ownership
constituted less than one percent of the Common Stock outstanding on the
Record Date.
2
<PAGE>
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for the classification of
the Board of Directors into three classes with each class of directors serving
staggered three-year terms. Four directors are to be elected at the Annual
Meeting, to serve for a term of three years expiring in 1997.
Directors will be elected by a plurality of the votes cast at the Annual
Meeting. All nominees have consented to be named and to serve if elected. The
Company does not presently know of anything that would preclude any nominee
from serving if elected. If any nominee, for any reason, should become unable
or unwilling to stand for election as a director, either the shares of Common
Stock represented by all proxies authorizing votes for such nominee will be
voted for the election of such other person as the Board of Directors may
recommend, or the number of directors to be elected at the Annual Meeting will
be reduced accordingly. All of the nominees are current directors of the
Company.
For each of the four nominees, as well as the nine directors whose terms
continue after the Annual Meeting, information follows as to age, length of
service as a director of the Company, positions and offices with the Company,
principal occupations during the past five years and other directorships of
publicly-held companies.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING ARE:
JOSEPH F. DECOSIMO, 68
Director since 1981.
Senior Partner, Joseph Decosimo & Company, 1971 to present.
LYLE EVERINGHAM, 67
Director since 1980.
Retired Chairman of the Board and Chief Executive Officer, Kroger Co. and
officer of that corporation or one of its divisions since 1963; Chairman of the
Executive Committee through May, 1991.
Other directorships: Kroger Co.; Cincinnati Milacron, Inc.; and Federated
Department Stores, Inc.
WATTS HILL JR., 67
Director since 1974.
Business and Financial Consultant, 1975 to present.
LARRY D. THOMPSON, 48
Director since February 1994.
Partner, King & Spalding (a law firm); he has been a partner with the firm
since 1986./1/
DIRECTORS CONTINUING IN OFFICE WHOSE TERMS EXPIRE IN 1995 ARE:
JOHN M. CRANOR III, 47
Director since 1991.
President and Chief Executive Officer of KFC Corporation, 1989 to present;
President, Pepsi-Cola East, 1988 to 1989; President, Pepsi-Cola USA Fountain
Beverage, 1986 to 1988.
J. DAVID GRISSOM, 55
Director since 1978.
Chairman, Mayfair Capital, 1989 to present; Vice Chairman, PNC Financial Corp.,
1987 to 1989; Chairman and Chief Executive Officer, Citizens Fidelity
Corporation, 1977 to 1989.
Other directorships: Columbia/HCA Healthcare Corporation; Churchill Downs,
Incorporated; LG&E Energy Corp.; Transco Energy Company; Regal Cinemas, Inc.;
and Sphere Drake Holdings, Ltd.
- ---------------------
/1/The Company retained King & Spalding during 1993 to perform certain legal
services.
3
<PAGE>
F. WARREN MCFARLAN, 56
Director since 1986.
Professor of Business Administration, Harvard Business School, 1973 to present;
a member of the Harvard faculty since 1964.
Other directorships: Pioneer Hi-Bred International, Inc.; and Computer Sciences
Corporation.
MARTHA R. SEGER, PH.D., 62
Director since 1991.
Financial economist and Distinguished Visiting Professor of Finance, Central
Michigan University, 1993-present; John M. Olin Distinguished Fellow,
University of Arizona, 1991 to 1993; Member, Board of Governors of the Federal
Reserve System, 1984 to 1991.
Other directorships: Amerisure Companies; Xerox Corp.; Kroger Co.; Johnson
Controls, Inc.; Amoco Co.; Fluor Corp.; and Tucson Electric Power Co.
FLORENCE R. SKELLY, 69
Director since 1986.
President, Telematics, Inc., 1986 to present; Partner, Yankelovich, Skelly &
White, Inc., 1961 to 1986.
DIRECTORS CONTINUING IN OFFICE WHOSE TERMS EXPIRE IN 1996 ARE:
IRVING W. BAILEY II, 52
Director since 1987.
Chairman, President and Chief Executive Officer, Capital Holding Corporation,
1988 to present; President and Chief Operating Officer, 1987 to 1988; Executive
Vice President and Chief Investment Officer, 1981 to 1987.
Other directorships: Computer Sciences Corporation; and BellSouth
Telecommunications, Inc.
JOHN L. CLENDENIN, 59
Director since 1984.
Chairman and Chief Executive Officer, BellSouth Corporation, 1984 to present.
Other directorships: BellSouth Corporation; Springs Industries, Inc.; Equifax
Inc.; National Service Industries Inc.; Kroger Co.; Coca-Cola Enterprises,
Inc.; and Wachovia Corporation.
RAYMOND V. GILMARTIN, 53
Director since 1993.
Chairman of the Board, President and Chief Executive Officer, Becton Dickinson
& Co., 1989 to present; President, 1987 to 1989; various operating positions,
1976 to 1987.
Other directorships: Becton Dickinson & Co.; and Public Service Enterprise
Group, Inc.
JOHN L. WEINBERG, 69
Director since 1979.
Senior Chairman, Goldman, Sachs & Co.,/1/ July, 1991 to present; Senior
Chairman, The Goldman Sachs Group, L.P., November, 1990 to July, 1991; Senior
Partner and Chairman of the Management Committee, 1984 to 1990.
Other directorships: B.F. Goodrich Company; E.I. du Pont de Nemours & Co.;
Knight Ridder, Inc.; Seagram Company Ltd.; and Champion International Corp.
- ---------------------
/1Goldman,/Sachs & Co. performed services for the Company during 1993. The
Company has contracted with that firm to perform services in 1994.
4
<PAGE>
COMMITTEES OF THE BOARD
The Board has several committees which perform various functions, including
those described below.
The AUDIT COMMITTEE makes recommendations to the Board of Directors with
respect to engagement of the Company's independent auditors, reviews with the
independent auditors the plan and results of the auditing engagement, and
reviews the Company's system of internal controls and accounting practices. The
members of the Audit Committee are Dr. Seger (Chair) and Messrs. Decosimo,
Gilmartin, Grissom, Thompson and Weinberg. The Audit Committee met four times
during 1993.
The HUMAN RESOURCES COMMITTEE reviews and approves the compensation and
benefits policies and practices of the Company except that approval of the
salaries and bonuses of the Chairman of the Board, President and members of the
Operating and Policy Committee of the Company are reserved to the full Board of
Directors. The committee also recommends to the Board nominations for directors
of the Company. In addition, the committee administers the Company's stock
option plans and Stock Ownership Plan. The Human Resources Committee is
comprised of Messrs. Everingham (Chair), Clendenin, Cranor, Hill and McFarlan,
and Ms. Skelly. The Human Resources Committee met five times during 1993.
DIRECTORS' MEETINGS
The Company's Board of Directors met six times in 1993. Each director attended
at least 76 percent of all Board and committee meetings held in 1993 during the
period when he or she was a director and committee member.
DIRECTORS' COMPENSATION
Directors who also are officers of the Company receive no additional
compensation for serving on the Company's Board of Directors. All other
directors are paid an annual retainer of $25,000, and may elect to receive all
or a portion of this amount in shares of Common Stock. Directors who elect to
receive all or a portion of their retainer in Common Stock will receive an
award equal to 25 percent of their retainer in shares of restricted stock under
the Company's Stock Ownership Plan. Such restricted stock vests one-half after
three years, and the balance after six years, if the director does not dispose
of the related shares of unrestricted Common Stock during such vesting periods.
Non-employee directors are paid an additional $1,000 for attending the Annual
Meeting and each Board and committee meeting. Committee chairs receive an
additional $300 for each meeting they conduct. The Company's directors also are
reimbursed for necessary and reasonable expenses incurred in the performance of
their duties as directors. In addition to this compensation, the Company has
purchased for each director (other than officers of the Company) from
Commonwealth Life Insurance Company, UniversaLife insurance policies, which
provide a death benefit of $100,000 to a beneficiary designated by the
director. To the extent that these policies create additional taxable income
for these directors, the Company also reimburses each director as necessary to
compensate for any additional taxes.
5
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows information for the last three fiscal years with
regard to compensation for services rendered in all capacities to the Company
by the Chief Executive Officer and the other four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-
Term Compensation
Annual
Compensation Awards Payouts
- --------------------------------------------------------------------------------------------------------------------
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Salary Bonus Compensation Award(s) Options/ Payouts Compensation
Position Year ($)/1/ ($) ($)/2/ ($)/3/,/4/ SARs (#) ($) ($)/5/
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Irving W. Bailey II 1993 $666,154 $457,400 $20,749 $114,347 60,000 $ $19,959
Chairman, President 1992 669,808 577,415 22,191 144,285 51,200 22,104
and CEO 1991 640,192 599,700 56,000 99,513/6/
Shailesh J. Mehta 1993 $369,266 $336,000 $ $805,240/8/ 24,200/9/ $ 8,356/1//1/ $12,186
Executive Vice 1992 323,925 229,400 57,315 15,200/9/ 75,193/1//1/ 4,800
President 1991 319,250 438,907/7/ 16,700/1//0/
Joseph M. Tumbler 1993 $317,539 $213,000 $ $ 53,233 16,300 $ $ 6,954
President and CEO-- 1992 304,269 208,000 51,952 18,000 10,041
Accumulation and 1991 286,654 198,000 22,000 35,511/6/
Investment Group
Lee Adrean 1993 $254,023 $139,000 $ $ 34,746 13,000 $ $ 4,947
President and CEO-- 1992 228,462 139,000 34,711 12,000 4,800
Agency Group 1991 196,058 116,725/7/ 8,600 3,015/6/
Frederick C. Kessell 1993 $262,462 $180,000 $ 492 $ 44,987 7,100 $ $ 7,679
Chief Investment 1992 263,769 178,000 161 44,443 8,600 7,913
Officer--Accumulation 1991 252,077 171,500 10,400 60,397/6/
and Investment Group
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/Represents amounts received as salary during the year. Such amounts may vary
in any given year as a result of the number of pay periods during such year.
/2/Represents amounts reimbursed during the fiscal year for the payment of
taxes.
/3/Represents the dollar value of restricted stock awarded under the Company's
Stock Ownership Plan ("SOP"). Restricted Stock awards under the SOP are
matched with a like number of shares of non-restricted stock and are intended
to replace a portion of cash amounts previously paid under the Company's other
incentive plans; one half of such restricted stock will vest if all
nonrestricted shares are held for three years and the other half will vest if
such nonrestricted stock is held for six years except in the event of a change
in control of the Company, in which case such shares vest immediately.
/4/Dividends are paid on restricted stock awards under the SOP at the same rate
as paid to all stockholders. On December 31, 1993, Irving W. Bailey II held
3,766 restricted shares with a market value of $139,813; Shailesh J. Mehta
held 21,496 restricted shares with a market value of $798,039; Joseph M.
Tumbler held 1,356 restricted shares with a market value of $50,342; Lee
Adrean held 906 restricted shares with a market value of $33,635; and
Frederick C. Kessell held 1,160 restricted shares with a market value of
$43,065.
/5/Represents contributions under the Company's Thrift Savings Plan. With
respect to Mr. Mehta, it also includes contributions under the 401(k) Plan of
First Deposit Corporation ("FDC"), a wholly-owned subsidiary of the Company.
/6/Represents final payment based on a 1988-1990 three-year performance cycle.
/7/Includes six percent premium ($2,907 for Mr. Mehta and $1,725 for Mr.
Adrean) for the election to receive Common Stock in lieu of cash. Such
election is no longer offered in connection with bonus payments.
/8/Includes the market value of 20,000 restricted shares awarded under the SOP
subject to performance and time based restrictions. If FDC's pre-tax operating
earnings and average return on capital meet pre-established targets for each
of the years 1993-1995, one-half of the restricted shares will vest in three
annual installments, each subject to a one-year continued employment
restriction period lapsing in 1994-1996. If FDC's pre-tax operating earnings
meet pre-established maximums, all of the restricted shares will vest in three
annual installments, subject to the one-year restriction periods.
/9/Represents options granted under the Company's 1989 Stock Option Plan and
Equity Units granted under the FDC Equity Unit Plan. (See footnote 3 to the
Option/SAR Grants table.)
/1//0/Represents Equity Units granted under the FDC Equity Unit Plan.
/1//1/Represents interim payout to Mr. Mehta based on the 1991-1993 three-year
performance cycle, with payment of 90 percent of such amount in 1992 and the
remaining 10 percent in 1993. The balance of payout is due in 1994.
6
<PAGE>
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS (SARS)
The following table contains information concerning the grant of stock options
under the Company's 1989 Stock Option Plan to the named executive officers of
the Company in 1993. Included is information on potential realizable value(s)
to the named executive officers, all optionees as a group, and all of the
Company's stockholders, assuming growth of the Common Stock at the stated rates
of appreciation.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term/1/
- ----------------------------------------------------------------------------------------
Number of % of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise
SARs Employees or Base
Granted in Fiscal Price Expiration 0%
Name (#) Year ($/Sh)/2/ Date ($) 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Irving W.
Bailey II 60,000 8.59% $43.0625 8/4/03 $ 0 $1,624,906 $4,117,832
Shailesh J.
Mehta 8,100 1.16 43.0625 8/4/03 0 219,362 555,907
10,000 1.43 41.9375 8/25/03 0 263,743 668,376
6,100/3/ 14.42 49.0000 8/4/03 0 187,977 476,370
Joseph M.
Tumbler 16,300 2.33 43.0625 8/4/03 0 441,433 1,118,678
Lee Adrean 13,000 1.86 43.0625 8/4/03 0 352,063 892,197
Frederick C.
Kessell 7,100 1.02 43.0625 8/4/03 0 192,281 487,277
All
Optionees/4/ 698,700 100.00 43.0625 8/4/03 0 18,922,030 47,952,155
All
Stockholders N/A N/A N/A N/A 0/5/
</TABLE>
- --------------------------------------------------------------------------------
/1The/amounts shown represent certain assumed rates of appreciation only.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the Company's Common Stock and overall condition of the stock
market, as well as the optionholder's continued employment through the
vesting period. The amounts reflected in this table may not necessarily be
achieved.
/2The/exercise price of Options is equal to the average of the Company's high
and low price of the Common Stock on the date of grant. The grant value of
Equity Units is based on book value and the market value of certain assets
determined by quarterly valuations. Options vest one-third per year and are
fully vested after three years. In addition, options vest immediately upon
the death, disability or retirement of the optionee or change in control of
the Company. All Options expire 10 years from the date of grant.
/3Denotes/the number of Equity Units granted under the First Deposit
Corporation Equity Unit Plan. Units vest one-third per year and are fully
vested after three years. In addition, Equity Units vest immediately upon a
change in control. All Equity Units expire 10 years from the date of grant.
/4Optionees/will realize benefit only upon an increase in the price of the
Company's Common Stock, which will benefit all stockholders commensurately. A
zero percentage gain in the stock price appreciation will result in zero
dollars for the optionee.
/5/Although stockholders would not realize any stock appreciation, the zero
amount does not reflect the value of dividends that stockholders may receive
over the ten-year option term. Based on the number of shares of Common Stock
outstanding as of the close of business on March 14, 1994 and assuming the
Company's current dividend rate remains in effect, total dividends received by
all stockholders during such period would be $804,078,528. There is no
guarantee that dividends, in fact, will be paid throughout such period or, if
paid, that the dividend rate will not change. Optionees will not receive
dividends until such time as they exercise the options.
7
<PAGE>
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information with respect to the named executives
concerning the exercise of options and/or SARs during 1993, and unexercised
options and SARs held as of the end of 1993.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options/SARs
FY-End (#) at FY-End ($)/1/
- -----------------------------------------------------------------------------------------
Shares
Acquired on Value
Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Irving W.
Bailey II 22,728 $646,759 235,401 112,799 $4,014,022 $466,086
Shailesh J.
Mehta 0 0 1,667 21,433 8,803 17,602
Equity
Units 0 0 96,060 18,467 4,505,729 445,812
Joseph M.
Tumbler 19,000 518,875 58,611 35,633 871,202 174,816
Lee Adrean 0 0 19,734 23,866 331,112 86,134
Frederick C.
Kessell 41,430 1,094,007 33,271 16,299 589,134 83,350
</TABLE>
- --------------------------------------------------------------------------------
/1As/to options, based on the average of the high and low price of the Common
Stock on December 31, 1993 of $37.0625 per share. As to Equity Units,
represents estimated fair market value of $64.35 per Equity Unit outstanding
under the FDC Equity Unit Plan as of December 31, 1993.
LONG TERM INCENTIVE PLAN
The following table provides information concerning awards made to the named
executive officers during 1993 under the Company's Long Term Incentive Plan.
Amounts earned under the Long Term Incentive Plan are based upon the financial
performance of the Company, as measured against the 19-company peer group
listed in the Performance Graph in this Proxy Statement, and the performance of
the Company's business units measured against key measures of economic value
creation, over a three-year performance cycle.
LONG TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Estimated Future Payouts Under
Non-Stock Price-Based Plans/1/
- ----------------------------------------------------------------------------------
Performance or
Other Period Until
Maturation or Threshold Target Maximum
Name Payout/2/ ($)/3/ ($)/3/ ($)/3/
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Irving W. Bailey II 1995 $67,000 $268,000 $402,000
Shailesh J. Mehta 1995 42,400 169,600 254,400
Joseph M. Tumbler 1995 32,200 128,800 193,200
Lee Adrean 1995 29,000 116,000 174,000
Frederick C. Kessell 1995 26,400 105,600 158,400
</TABLE>
- --------------------------------------------------------------------------------
/1/Payouts are to be determined (i) relative to the Company's ranking within
a 19-company peer group based on normalized return on equity and normalized
earnings per share performance over the three-year performance cycle, and
(ii) with respect to Messrs. Adrean, Kessell, Mehta, and Tumbler based, in
part, on business unit performance.
/2/Payouts would be made in 1996 following the three-year performance cycle
(1993-1995).
/3/Actual payouts, if any, will be based on the named executive officer's
annual salary at year-end 1995; the estimates shown assume no salary
increases to current base salaries.
8
<PAGE>
PENSION PLANS
The following table shows the estimated pension benefits payable to a covered
participant upon retirement at age 65 under the Company's qualified defined
benefit pension plan, as well as the nonqualified supplemental pension plan
that provides benefits that would otherwise be denied participants by reason of
certain Internal Revenue Code limitations on qualified plan benefits. Estimated
pension benefits are based on remuneration covered under the plans, and years
of service with the Company and its subsidiaries.
CAPITAL HOLDING CORPORATION RETIREMENT PLAN
ESTIMATED BENEFIT TABLE
<TABLE>
<CAPTION>
5 Years 10 Years 15 Years 20 Years
of of of of 25 Years of 30 Years of
Remuneration Service Service Service Service Service Service
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 400,000 $ 34,632 $ 69,264 $103,896 $138,528 $ 173,160 $ 207,792
500,000 43,380 86,760 130,152 173,532 216,912 260,292
600,000 52,128 104,268 156,396 208,536 260,664 312,792
700,000 60,888 121,764 182,652 243,528 304,416 365,292
800,000 69,636 139,260 208,896 278,532 348,168 417,792
900,000 78,384 156,768 235,152 313,536 391,908 470,292
1,000,000 87,132 174,264 261,396 348,528 435,660 522,792
1,100,000 95,880 191,760 287,652 383,532 479,412 575,292
1,200,000 104,628 209,268 313,896 418,536 523,164 627,792
1,300,000 113,388 226,764 340,152 453,528 566,916 680,292
1,400,000 122,136 244,260 366,396 488,532 610,668 732,792
1,500,000 130,884 261,768 392,652 523,536 654,408 785,292
1,600,000 139,632 279,264 418,896 558,528 698,160 837,792
1,700,000 148,380 296,760 445,152 593,532 741,912 890,292
1,800,000 157,128 314,268 471,396 628,536 785,664 942,792
1,900,000 165,888 331,764 497,652 663,528 829,416 995,292
2,000,000 174,636 349,260 523,896 698,532 873,168 1,047,792
2,100,000 183,384 366,768 550,152 733,536 916,908 1,100,292
2,200,000 192,132 384,264 576,396 768,528 960,660 1,152,792
2,300,000 200,880 401,760 602,652 803,532 1,004,412 1,205,292
2,400,000 209,628 419,268 628,896 838,536 1,048,164 1,257,792
- ---------------------------------------------------------------------------
</TABLE>
The compensation covered by the plans includes all compensation in the form of
salary and bonuses as shown in the Summary Compensation Table, plus deferrals
under the Thrift Savings Plan and the FDC 401(k) Plan and certain pre-tax
contributions to the Company's flexible benefits plan. The benefits are
computed on a straight-life annuity basis and are subject to deduction for
Social Security offset amounts. For purposes of computing this offset,
participants' normal retirement age (65) as of 12/31/93 is used. Credited years
of service under the plans and other arrangements as of 12/31/93 for the named
executive officers were as follows: Mr. Bailey, 13; Mr. Mehta, 6; Mr. Tumbler,
6; Mr. Adrean, 4; Mr. Kessell, 9.
9
<PAGE>
HUMAN RESOURCES COMMITTEE REPORT
The Company's executive compensation programs are administered by the Human
Resources Committee (the "Committee"), a committee of the Board of Directors
composed exclusively of non-employee directors. The Committee either approves
or recommends to the Board of Directors payment amounts and award levels for
the Company's executive officers. None of the non-employee directors has any
interlocking or other relationship with the Company that would call into
question his or her independence as a Committee member.
COMPENSATION PHILOSOPHY
The policies that govern executive compensation continue to align changes in
total compensation with changes in the value created for our stockholders.
These policies require that our executive compensation program:
. reflect a clear risk-based pay-for-performance relationship;
. integrate executive compensation with the Company's business planning and
measurement process. [Executives are rewarded for both absolute annual
performance as well as relative, multi-year performance compared to a 19-
company peer group.];
. reward executives with direct ownership in the Company and align their
personal interests with shareholder interests to continually reinforce
building shareholder value; and
. attract and retain key executives critical to the Company's long-term
success.
The Company's executive compensation program has been and continues to be based
on three components, each of which support our overall compensation philosophy.
BASE SALARY
The Company uses a consistent methodology to determine base salaries for all
employees. Salary ranges are established for specific positions and job
families using relevant salary surveys. Individual salaries are then determined
to assure competitive pay, given individual performance. For executive
positions, the Company annually participates in surveys of diversified
insurance companies. In addition, an independent consulting firm provides an
assessment of our competitive position as compared to a 19-company peer group.
This peer group is subject to periodic review and is modified as competitors
merge or are acquired, or as new competitors emerge with sufficient market
capitalization. This 19-company peer group is consistent with the peer group
depicted in the Performance Graph in this Proxy Statement. Base salaries for
executives are reviewed by the Committee relative to competitive pay levels, as
well as against individual performance objectives, with the goal of positioning
base salaries near the 50th percentile of our relevant competitive markets.
Early in 1993, a diversified insurance company survey of 1992 base salaries
among competitor CEOs indicated that Mr. Bailey's salary was at the median for
the group and that 1993 salary increases were projected to range from 4.5
percent to 5.0 percent. In February, the Committee recommended a 1993 base
salary increase of $25,000 or 3.9 percent, which provided a new base salary of
$670,000 for Mr. Bailey. This decision reflected in part the Committee's desire
to maintain a competitive base salary for Mr. Bailey, following no base salary
increase in 1992 and Company performance which exceeded the median of the 19-
company peer group in terms of return on equity (ROE) performance.
Additionally, the Committee recognized that its strategy of placing a greater
percentage of Mr. Bailey's total compensation at risk had been achieved, by
more directly tying his total compensation to stockholder returns through our
Stock Ownership Plan. In August 1993, a follow-up analysis of proxy statements
of our 19-company peer group indicated that CEOs within these companies
received average base salary increases of 11.3 percent and had a median base
salary of $778,000.
10
<PAGE>
ANNUAL INCENTIVES
The Company provides annual incentive award opportunities for executives based
upon the earnings of the Company and the Company's various business units, as
well as the successful achievement of individual performance objectives, which
are established annually. The earnings plan is set for the upcoming year as
part of the Company's annual business planning process and is approved by the
Committee before the annual performance cycle commences. The Committee reviews
and approves award payouts in the February following the annual performance
cycle, based upon the prior year's performance results. A portion of annual
incentive awards may be paid to participants in Common Stock, under the
provisions of the Stock Ownership Plan described in the following section. It
has been the Company's policy to set challenging earnings targets which, if
achieved, would position total annual cash compensation above median
competitive levels. Achieving target earnings per share (EPS) performance would
position Mr. Bailey's total annual cash compensation above the median (at
approximately the 60th percentile) for chief executive officers of the 19-
company peer group as well as a broader group of diversified insurance
companies. Earnings performance above or below this target results in a
formula-driven award by the Committee.
Mr. Bailey's annual incentive award for 1993 was based on the degree to which
target EPS for the Company was achieved. We recommended, and the Board
approved, that he receive an award of $457,400, based upon the Company's
achieving EPS of $3.32 in 1993, which was slightly below the $3.33 EPS target
established for 1993.
LONG TERM INCENTIVES
The Company provides executives both cash and equity-based long term incentive
opportunities. Under the Company's Long Term Incentive Plan (LTIP), cash
incentive awards are based upon the Company's relative earnings growth and ROE
over three-year performance cycles, as measured against the 19-company peer
group listed in the Performance Graph in this Proxy Statement. Three-year LTIP
performance cycles for 1991-93 and 1992-94 are currently in effect and a new
performance cycle began on January 1, 1993 and will end December 31, 1995.
These performance cycles may result in payment to executives in May of 1994,
1995, and 1996 respectively, if predetermined corporate and business unit
performance objectives are met.
Through the Company's Stock Ownership Plan (SOP), a portion of all executive
incentive awards are paid in Common Stock, based on this Committee's
administration of the Plan. The amount of SOP awards granted to executives is
based on identical performance measures employed by the Committee to determine
annual and long term incentive awards, which are described in the above
sections of this report pertaining to annual incentives and long term
incentives. Stock awarded to participants under the SOP is deposited into an
account in the participant's name and matched with an equal number of shares of
restricted stock. Participants are free to withdraw the awarded shares of
Common Stock at any time, but will forfeit all shares of matching restricted
stock if the withdrawal occurs prior to the end of the applicable restriction
period. We approved a 1993 SOP grant equal to 25 percent of Mr. Bailey's 1993
annual incentive plan award, or 3,439 shares at $33.25 per share, matched by an
equal number of restricted shares, which will fully vest if Mr. Bailey holds
the awarded shares for a six-year period.
A separate performance-based restricted stock program was implemented in
January 1993 for selected executives of First Deposit Corporation (FDC), a
wholly-owned subsidiary of the Company. The purpose of this program is to
motivate the covered executives to increase FDC earnings to higher sustainable
levels, without compromising underlying profit drivers in FDC. Under this
program, selected FDC executives received grants totaling 40,000 shares of
Company Common Stock subject to performance and time-based restrictions.
The Company also provides grants of stock options to executives and other
employees. These option grants tie rewards to the future performance of the
Company's Common Stock and provide value only
11
<PAGE>
when the price of the Common Stock increases above the option grant price
(determined by the average of the high and low price of the Common Stock on the
date of grant). Options currently vest in equal amounts over three years and
require the executive to be employed by the Company at the time of vesting.
Options expire ten years from the date of grant. Through these grants, we
intend to motivate executives to improve long-term stock performance. A similar
plan currently provides "phantom" stock grants, in the form of Equity Units, to
executives and other employees of FDC.
In granting stock options, the Committee takes into account competitive grant
practices within the diversified insurance industry and our 19-company peer
group, the executive's level of responsibility, individual contribution and
total annualized compensation. Mr. Bailey was awarded a grant of 60,000 stock
options at an exercise price of $43.0625 per share on August 4, 1993.
In February 1993, this Committee approved implementation of stock ownership
guidelines for executives. The purpose of these guidelines is to ensure that
executives achieve and maintain specified ownership levels of Company Common
Stock over a multi-year period, and to tie their personal interests more
closely to stockholder interests. These ownership targets were derived from
competitive data covering multiple industries and represent the value of target
Company stock ownership levels as a percentage of executive base salaries. Mr.
Bailey's target ownership level is 600 percent of his base salary.
SUMMARY OF CEO COMPENSATION
Overall, we have attempted to ensure that Mr. Bailey's base salary remains
competitive, but have placed a greater percentage of his total compensation at
risk and related to Company performance. For Mr. Bailey, 50 percent of target
annualized cash compensation is explicitly linked to achieving targeted
earnings and longer term (three-year) earnings growth and ROE performance
levels. The annual and multi-year cash incentives require sustained financial
performance and the restricted stock and stock options require increased
stockholder value. As shown in the performance graph, the five-year total
return of Capital Holding Common Stock, including reinvested dividends,
compared to both the Standard & Poor's 500 Stock Index and the 19-company peer
group index, demonstrates the strong returns to stockholders as the Company's
compensation philosophy, policies and programs have been and continue to be
implemented.
OMNIBUS BUDGET RECONCILIATION ACT OF 1993
The Omnibus Budget Reconciliation Act of 1993 (OBRA) established several new
criteria for continued tax deductibility of executive compensation in excess of
$1 million. This Committee has reviewed and approved adoption of a modification
of the Capital Holding 1989 Stock Option Plan to conform to OBRA requirements
for stock options. We believe that the modification responds to these new tax
guidelines and will preserve deductibility of stock options to be awarded in
the future to the Company's executive officers. The modified Capital Holding
1989 Stock Option Plan is presented in this Proxy Statement for review and
approval by stockholders.
HUMAN RESOURCES COMMITTEE
Lyle Everingham (Chair)
John L. Clendenin
John M. Cranor III
Watts Hill, Jr.
F. Warren McFarlan
Florence R. Skelly
12
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line-graph presentation comparing cumulative, five-year
stockholder returns on an indexed basis with the Standard & Poor's 500 Stock
Index and an index of peer issuers selected by the Company. The Human Resources
Committee of the Board of Directors has approved a group of 19 publicly-traded
life insurance companies as its index of peer issuers. These companies were
selected to provide consistency with the Company's LTIP program; earnings data
from these same 19 companies will be used to determine LTIP payouts for the
1992-94 LTIP cycle. A list of these companies follows the graph below:
[PERFORMANCE GRAPH SUBMITTED UNDER FORM S.E.]
*Assumes that the value of the investment in Company Common Stock and each
index was $100 on December 31, 1988 and that all dividends were reinvested. The
19 companies used for purposes of peer comparison are: AFLAC Inc.; American
General Corp.; American National Insurance Co.; AON Corp.; First Executive
Corp.; Home Beneficial Corp.; I.C.H. Corp.; Jefferson-Pilot Corp.; The Liberty
Corp.; Lincoln National Corp.; Monarch Capital Corp.; The NWNL Companies;
Provident Life & Accident Insurance Co. of America; Torchmark Corp.; Unitrin;
UNUM Corp.; USLICO Corp.; USLIFE Corp.; and Washington National Corp. Colonial
Companies Inc., which was previously among the group of 19 peer issuers was
removed from the group because of its merger with UNUM Corp. and, with the
approval of the Human Resources Committee, was replaced by Unitrin.
OTHER PLANS AND AGREEMENTS
Since 1988, Mr. Bailey has served as Chairman and Chief Executive Officer of
the Company pursuant to a five-year employment agreement. Beginning in
February, 1993, the agreement became automatically renewable for one-year
periods unless terminated by either party pursuant to the terms of the
agreement. The agreement provides for an initial base salary of $475,000,
subject to annual review, and entitles Mr. Bailey to participate in the
Company's management incentive compensation plans. The agreement entitles Mr.
Bailey to a supplemental pension to be paid at age sixty, subject to offset by
pension amounts and certain Social Security benefits otherwise received by Mr.
Bailey. If Mr. Bailey's employment is terminated without cause, he will be
entitled to salary and bonus payments and participation in the Company's
employee benefit plans for 24 months following such termination, as well as a
payout with respect to stock options then held by Mr. Bailey. In the event of
such termination following a change in control of the Company (as defined in
the agreement), Mr.
13
<PAGE>
Bailey will be entitled to the same benefits except that such payment (other
than continued participation in employee benefit plans) will be made to him in
a lump sum. The agreement also provides for indemnification by the Company of
Mr. Bailey for any excise taxes in the event that benefits paid pursuant to a
change in control trigger adverse tax consequences.
The Company has entered into agreements with Messrs. Adrean, Kessell, Mehta and
Tumbler, and five other officers of the Company, two of whom are executive
officers, providing certain benefits upon termination of employment following a
change in control of the Company (as defined in the agreements). Pursuant to
the agreements, if a covered executive's employment is terminated within five
years after the date of a change in control for any reason other than death,
disability, or for cause, the executive is entitled to severance pay and
certain other benefits. The severance payments are based on the executive's
annual compensation, multiplied by a factor of two. The agreements also provide
for indemnification by the Company of the executive for any excise taxes in the
event that benefits paid pursuant to a change in control trigger adverse tax
consequences to the executive.
In 1990, the Board approved a change in control policy (the "Policy") for all
regular, full-time employees who are involuntarily terminated, other than for
cause or as a result of death or disability, within a two-year period following
a change in control of the Company. Under the Policy, full-time employees are
generally eligible to receive a lump sum payment in an amount equal to one week
of the employee's average compensation (including base and incentive award for
incentive-eligible employees and base only for all others) for each six months
of service. The Policy provides for a minimum severance amount regardless of
the length of the employee's prior service and also subjects severance benefits
to a maximum based on job grade levels. The Policy does not apply to the
officers covered by the change in control agreements described above.
In April, 1986, Mr. Mehta joined FDC as Executive Vice President and Chief
Operating Officer in accordance with the terms of a written offer of employment
(the "Offer"). Under the terms of the Offer, FDC established a deferred
compensation account for Mr. Mehta and agreed to make contributions to it in an
amount equal to 20 percent of Mr. Mehta's base salary less the cost of any FDC
employee benefits elected by Mr. Mehta. Amounts held in the deferred
compensation account are to be paid to Mr. Mehta upon termination of
employment. The Offer was amended August 5, 1992, to discontinue the obligation
to contribute to the deferred compensation account effective July 31, 1992. In
lieu thereof, Mr. Mehta became entitled to participate in the Company's
qualified defined benefit pension plan and nonqualified supplemental pension
plan, with his employment commencement date deemed to be January 1, 1988 for
purposes of the nonqualified supplemental pension plan as reflected in the
Capital Holding Corporation Retirement Plan Estimated Benefit Table. In the
event of Mr. Mehta's termination of employment, amounts payable under these
pension plans will be comparable to the continuation of his original agreement,
with any shortfall to be paid to Mr. Mehta in the form of a nonqualified
annuity.
PROPOSAL 2: TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE
NAME OF THE COMPANY
The Board of Directors has unanimously approved and recommends that the
stockholders approve an amendment to Article FIRST of the Company's Certificate
of Incorporation which would change the name of the Company from Capital
Holding Corporation to Providian Corporation.
The Company was formed in 1969 for the primary purpose of expanding its home
service insurance operations. Since then, the Company has expanded, and today
provides a number of insurance and financial service products through a variety
of distribution channels. In view of this evolution, the Board believes that a
change to Providian Corporation will more adequately reflect and communicate
the Company's strategy and mission and provide the Company's business units
with the benefit of being publicly identified as part of a single, larger
financial services organization.
14
<PAGE>
The affirmative vote of the holders of a majority of the outstanding shares of
the capital stock entitled to vote at the Annual Meeting is required to approve
this amendment to the Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
CERTIFICATE OF INCORPORATION CHANGING THE COMPANY'S NAME TO PROVIDIAN
CORPORATION.
PROPOSAL 3: TO AMEND THE COMPANY'S 1989 STOCK OPTION PLAN
The Board of Directors recommends that stockholders approve amendments to the
Company's 1989 Stock Option Plan (the "Plan") to address tax deductibility
limits imposed by the Omnibus Budget Reconciliation Act of 1993 ("OBRA") and to
give grantees under the Plan additional flexibility in the areas of retirement
and estate planning.
DESCRIPTION OF THE PLAN
The Plan was approved by stockholders at the 1989 Annual Meeting and authorizes
the issuance of up to 4.4 million shares of Common Stock upon the exercise of
options awarded under the Plan. The Plan also authorizes the award of stock
appreciation rights ("SARs") in tandem with options, in an amount not to exceed
one-half of the number of options to which the SARs relate. At December 31,
1993, 2,402,016 options were outstanding under the Plan. No SARs have been
awarded under the Plan. A copy of the Plan and a description of its provisions
was provided to stockholders in the Company's Proxy Statement for the 1989
Annual Meeting.
DESCRIPTION OF THE AMENDMENTS
The Board of Directors amended the Plan on February 16, 1994, subject to
stockholder approval at the Annual Meeting. The amendments (i) limit to a
maximum of 500,000 the number of shares with respect to which options may be
granted to any employee during any fiscal year; (ii) eliminate the Plan's
restriction on transferability of options and SARs; (iii) extend the exercise
period for options and SARs following the death, disability or retirement of an
optionee to five years (but in no event beyond the term of the option or SAR);
and (iv) permit the committee to extend the benefits of Plan amendments to
options and SARs outstanding under the Plan at the time of any such amendment.
A description of each of the amendments is set forth below.
Discussion of OBRA and Related Plan Amendment. Tax legislation known as OBRA
was passed by Congress and signed into law by the President in 1993. Under
OBRA, subject to certain exceptions and transition provisions, the allowable
deduction for compensation paid or accrued with respect to the chief executive
officer and each of the four most highly compensated employees of a publicly-
held corporation is limited to $1 million per year for fiscal years beginning
on or after January 1, 1994. Certain types of compensation are exempted from
this deduction limitation, including payments subject to: (1) the attainment of
an objective performance goal; (2) administration of the plan by outside
directors; and (3) stockholder approval of performance-based compensation.
Options and SARs issued under the Plan currently meet the first requirement
since each is awarded at a price not less than the fair market value of the
Common Stock on the date of grant, with the result that such awards are treated
as "performance-based" compensation for purposes of OBRA. The Plan's
administration by the Human Resources Committee ("Committee") satisfies the
second requirement.
In order to satisfy the third requirement of OBRA with respect to the award of
options under the Plan, stockholders must now approve the maximum number of
shares subject to options that can be awarded under the Plan to any single
employee in any year. The amendment adopted by the Board and recommended for
stockholder approval specifies that no more than 500,000 options may be granted
to any single employee during any fiscal year of the Company. Approval of the
amendment by stockholders is intended to qualify options granted under the Plan
under OBRA, thus preserving the Company's tax deduction if and when the stock
options are exercised.
15
<PAGE>
Discussion of Other Plan Amendments. The Plan currently provides that options
and SARs held by an optionee at the time of his or her retirement, disability
or death may be exercised only for a two-year period. Over the past several
years, many companies have amended their stock plans to lengthen the period
after retirement, death or disability during which employees may exercise
options and SARs. An extended exercise period provides employees or their
estates with greater financial planning flexibility. The Company believes that
extending the post-termination exercise period to five years from the current
two years (but in no event later than the expiration date of the option or SAR)
will improve the effectiveness of the Plan.
The Plan also currently prohibits the transfer of options and SARs by grantees
other than by will or the laws of descent and distribution. While a
transferability restriction is required under certain circumstances for the
grantee to benefit from tax and securities laws, it is not necessary for the
Plan to mandate such a restriction. There may be instances where it would
benefit the Company or the grantee to not have restrictions on transfer.
Accordingly, the amendment would give the Committee the flexibility to include
or exclude such transferability restrictions in option and SAR agreements as
appropriate.
The Board also has amended the Plan to give the Committee authority to extend
the benefits of Plan amendments, to options and SARs outstanding under the Plan
at the time of any such amendments. The Committee has determined that, if the
above-described amendment extending the exercise period upon the retirement,
death or disability of a grantee is approved by stockholders at the Annual
Meeting, all options currently outstanding under the Plan will be amended to
reflect the extended post-termination exercise period. The amendment
eliminating the transferability restriction on options will not be applied to
any options currently outstanding under the Plan.
The Board believes that these amendments are necessary to provide its employees
with the retirement and estate planning flexibility afforded to other employees
of publicly-held companies. The amendments not only permit a retiring employee
(or his or her estate) flexibility for financial planning and estate planning
purposes, but also encourage longer term goals for Company performance and
avoid an arbitrary post-termination expiration date which could come at a time
when the stock market may not accurately reflect the value of the Common Stock.
OPTIONS AFFECTED BY PLAN AMENDMENTS
If the proposed amendments are approved by stockholders at the Annual Meeting,
all options currently outstanding under the Plan will be amended to reflect the
extended post-termination exercise period. This will affect options currently
outstanding under the Plan as follows: Irving W. Bailey II, 215,200 options;
Shailesh J. Mehta, 23,100 options; Joseph M. Tumbler, 72,300 options; Lee
Adrean, 43,600 options; Frederick C. Kessell, 35,500 options; all current
officers as a group (10 in number, including the above named individuals),
468,099 options; and all other employees, 1,933,917 options.
The closing price of the Company's Common Stock as reported on the NYSE
Composite Tape on March 14, 1994 was $33.00 per share.
FEDERAL INCOME TAX CONSEQUENCES
With respect to nonqualified options and SARs, the Company is generally
entitled to an income tax deduction when the option or SAR is exercised in an
amount equal to the excess of the fair market value of the Common Stock on the
date of exercise over the exercise price. As indicated above, by amending the
Plan to specify the maximum number of options that can be granted to any
employee in any fiscal year, such deduction will not be subject to the $1
million per employee limitation.
The amendment of the Plan to extend the exercise period in the case of death,
disability or retirement, and to permit transferability will not have any
income tax effect with respect to nonqualified options and SARs. In the case of
incentive stock options ("ISOs") (none of which have been granted under the
16
<PAGE>
Plan), the extended exercise period, if utilized by a grantee, would result in
the grantee losing the favorable tax treatment afforded ISOs. In addition, if
the transferability feature were included in an option, it could not qualify as
an ISO.
REQUIRED STOCKHOLDER APPROVAL
Approval of the foregoing proposal requires the affirmative vote of a majority
of the shares present and entitled to vote on the matter at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE 1989
STOCK OPTION PLAN.
PROPOSAL 4: TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO CREATE A
CLASS OF PREFERENCE STOCK
At present, the Company's Certificate of Incorporation ("Certificate")
authorizes the issuance of 306,000,000 shares of capital stock of which
6,000,000 are Preferred Stock, par value $5 per share, and 300,000,000 are
Common Stock, par value $1 per share. Articles Fourth (A) and (C) of the
proposed amendment to the Certificate would authorize the additional issuance
of 25,000,000 shares of Preference Stock, $.01 par value, which may be issued
upon authority of the Board.
Under the proposed amendment, the Board can authorize the issuance, at any time
or from time-to-time, of one or more series of Preference Stock without further
stockholder approval. In addition, the Board would determine all designations,
relative rights, preferences, and limitations of such stock, including but not
limited to, the designation of series and numbers of shares; the dividend
rights, if any; the rights upon liquidation or distribution of the assets of
the Company, if any; the conversion or exchange rights, if any; the redemption
provisions, if any; the sinking fund provisions, if any; and the voting rights,
if any, provided that the holders of shares of Preference Stock will not be
entitled to more than one vote per share, when voting as a class with the
holders of shares of the Common Stock.
The Board and management of the Company believe that amending the Certificate
to permit the Board to authorize the issuance of Preference Stock will provide
flexibility for future financings. The Company also could issue Preference
Stock for other corporate purposes, such as to implement equity alliances or to
make acquisitions, although no issuances for such purposes are presently
contemplated. If the amendment is approved, the Board will be able to specify
the precise characteristics of Preference Stock to be issued, depending on
current market conditions and the nature of specific transactions.
Even though voting rights of Preference Stock are limited as described above,
the issuance of Preference Stock could be used to discourage attempts to
acquire control of the Company and increase the Board's ability to continue
then current management. Neither the Board nor management is considering the
use of Preference Stock for such purposes, and neither is aware of any present
effort to accumulate the Company's securities for the purpose of gaining
control of the Company. The Board and management represent that they will not
issue, without prior stockholders' approval, Preference Stock, (i) for any
defensive or anti-takeover purpose, (ii) to implement any stockholders' rights
plan, (iii) with features intended to make any attempted acquisition of the
Company more difficult or costly, or (iv) to any individual or group for the
purpose of creating a block of voting power to support management on a
controversial issue. Therefore, the Board and management believe that, as
structured, the authorization of Preference Stock is in the best interest of
stockholders and the Company since it (i) will enable the Company to take
advantage of financing alternatives at a lower effective cost, (ii) is
consistent with corporate governance principles, and (iii) could not
disproportionately affect the voting power of existing stockholders.
The affirmative vote of the holders of a majority of the outstanding shares of
the capital stock entitled to vote at the Annual Meeting is required to approve
this amendment to the Certificate of Incorporation.
17
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
CERTIFICATE OF INCORPORATION TO CREATE A CLASS OF PREFERENCE STOCK.
PROPOSAL 5: TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, adopting the recommendation of the Audit Committee, has
appointed the certified public accounting firm of Ernst & Young as the
Company's independent auditors for 1994, subject to ratification by the
stockholders at the Annual Meeting. Representatives of the firm are expected to
attend the Annual Meeting to answer appropriate questions and, if they desire,
to make a statement. Ernst & Young has served as the Company's independent
auditors since 1969.
If the appointment of Ernst & Young is not ratified by a majority of the votes
cast at the meeting, or if Ernst & Young declines or is incapable of acting,
the appointment of independent auditors will be submitted to the Board of
Directors for reconsideration.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG AS THE COMPANY'S INDEPENDENT AUDITORS.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities Exchange Commission
initial reports of stock ownership and reports of changes in stock ownership. A
Form 5 report relating to the Company's 1993 fiscal year filed by Irving W.
Bailey II, the Company's Chairman, President and Chief Executive Officer,
inadvertently omitted a gift by Mr. Bailey in October 1993 of 400 shares of
Common Stock. Once the error was discovered, an amendment was promptly filed.
OTHER PROPOSED ACTION
The Company knows of no business to come before the Annual Meeting other than
the matters described above. Should any other business properly come before the
meeting, stockholders' proxies will be voted in accordance with the judgment of
the person or persons voting the proxies.
STOCKHOLDER PROPOSALS
Any stockholder may submit a proposal for consideration at the Annual Meeting.
To be included in next year's proxy statement, stockholder proposals for the
1995 Annual Meeting must be received in writing by December 2, 1994, by the
Secretary, Capital Holding Corporation, Post Office Box 32830, Louisville,
Kentucky 40232. The Board of Directors will decide, subject to the rules of the
Securities and Exchange Commission, whether such proposals are to be included
in the proxy and proxy statement.
Stockholders also may recommend candidates for directors. The Human Resources
Committee of the Board of Directors, which serves as the nominating committee
for the Board in recommending nominations for directors of the Company, will
consider such recommendations for the 1995 Annual Meeting and subsequent annual
meetings. Recommendations should be submitted in writing no later than October
31 of each year to the Human Resources Committee, c/o Secretary, Capital
Holding Corporation, Post Office Box 32830, Louisville, Kentucky 40232.
In addition to these requirements, the Company's By-laws impose notice
requirements on a stockholder nominating a director or submitting a proposal to
an annual meeting. Such notice shall be submitted to the Secretary of the
Company no earlier than 90, nor later than 60, days before an annual meeting,
and shall contain the information prescribed by the By-laws, copies of which
are available from the Secretary. These requirements apply even if the
stockholder does not desire to have his or her nomination, or proposal included
in the Company's proxy statement.
CAPITAL HOLDING CORPORATION
By: Robert Michael Slaven
Secretary
Louisville, Kentucky
March 31, 1994
18
<PAGE>
- --------------------------------------------------------------------------------
[X] Please mark your votes as in this example. | 9863
|_____
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS.
- --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of Directors (see reverse) [_] [_]
For, except vote withheld from the following nominee(s):
FOR AGAINST ABSTAIN
2. Amendment to change the Company's name [_] [_] [_]
FOR AGAINST ABSTAIN
3. Amendment of 1989 Stock Option Plan [_] [_] [_]
FOR AGAINST ABSTAIN
4. Amendment to create class of preference stock [_] [_] [_]
FOR AGAINST ABSTAIN
5. Ratification of appointment of Auditors [_] [_] [_]
- --------------------------------------------------------------------------------
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
----------------------------
----------------------------
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
[CAPITAL HOLDING LOGO]
March 31, 1994
Dear Owner:
Now in our 25th year in business as Capital Holding Corporation, we have
established a strong and consistent record of performance. Every year since our
inception in 1969, Capital Holding has increased operating income and
dividends. Few Fortune 500 companies can make the same claim.
Our 25th anniversary annual report is enclosed for your review. It discusses
how we recognized and seized business opportunities in the past and summarizes
last year's performance. Also enclosed is our Notice of Annual Meeting and
Proxy Statement which identifies matters to be discussed and voted upon during
our annual meeting of stockholders on Wednesday, May 11, 1994, at the Hyatt
Regency in Louisville, Kentucky.
You may vote your shares using the proxy card above. Just detach the card from
this letter, vote your shares and return your proxy card in the enclosed
envelope. Thank you for your continuing interest and investment in Capital
Holding.
Sincerely,
/s/ Irving W. Bailey II
- -----------------------
Irving W. Bailey II
Chairman, President and Chief Executive Officer
<PAGE>
- ----------------------------------------------------------------------
P R O X Y
CAPITAL HOLDING CORPORATION
P.O. BOX 32830
LOUISVILLE, KENTUCKY 40232
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Irving W. Bailey II, J. David Grissom and John
M. Cranor III, and each of them, proxies with power of substitution to vote all
shares of Common Stock which the undersigned would be entitled to vote at the
Annual Meeting of Capital Holding Corporation (the "Company") on May 11, 1994
at 11:00 a.m., E.D.T., and any adjournments thereof, upon the matters set forth
below and any other business that may properly come before the meeting.
1. Election of Directors. Nominees for directors are Joseph F. Decosimo, Lyle
J. Everingham, Watts Hill Jr., and Larry D. Thompson.
2. Amendment of the Company's Certificate of Incorporation to change the name
of the Company to Providian Corporation.
3. Amendment of the Company's 1989 Stock Option Plan.
4. Amendment of the Company's Certificate of Incorporation to create a class of
preference stock.
5. Ratification of the Appointment of Ernst & Young as Independent Auditors.
-----------
SEE REVERSE
SIDE
-----------
/\ PLEASE DETACH HERE. COMPLETE, SIGN AND RETURN CARD. /\
CAPITAL HOLDING CORPORATION
Annual Meeting of Stockholders
May 11, 1994
11:00 a.m.
Regency Ballroom
Hyatt Regency
Louisville, Kentucky
