NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 11, 1998
To the Shareholders of Capitol Transamerica Corporation (CTC):
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Capitol Transamerica Corporation (CTC) will be held at The Marriott Inn-Madison
West, 1313 John Q. Hammons Drive, Middleton, WI, on Monday, May 11, 1998 with
registration at 3:30 p.m. and the meeting at 4:00 p.m. central daylight time
for the following purposes:
1. To elect two directors for three year terms expiring in 2001,
2. To ratify the appointment of Ernst & Young LLP, as the
Company's independent auditors for 1998; and
3. To transact such other business that may properly come
before the meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on March 13,
1998 as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting and any adjournment thereof.
All shareholders are cordially invited to attend the Annual Meeting.
Whether or not you plan to attend the meeting, the Board of Directors urges you
to complete, date, sign and return the enclosed proxy as soon as possible in
the enclosed business reply envelope, which requires no postage if mailed in
the United States. You may revoke the proxy at any time prior to voting time
provided that you comply with the procedures set forth in the Proxy Statement
to which this Notice of Annual Meeting of Shareholders is attached. If you
attend the Annual Meeting, you may if you desire, withdraw your proxy at the
registration desk and vote in person.
By order of the Board of Directors,
Virgiline M. Schulte
Corporate Secretary
Madison, Wisconsin
April 6, 1998
IMPORTANT: PLEASE PROMPTLY MAIL YOUR PROXY IN THE ENCLOSED ENVELOPE.
THE MEETING DATE IS MAY 11, 1998
CAPITOL TRANSAMERICA CORPORATION
4610 University Avenue - Madison, Wisconsin 53705-0900
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 1998
SOLICITATION AND REVOCATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors (the
"Board") of Capitol Transamerica Corporation to be used at the Annual Meeting
of Shareholders to be held on May 11, 1998 and any adjournments thereof. Shares
of stock may be voted at the Annual Meeting only if the shareholder is repre-
sented by proxy or is present in person. The proxy procedure is necessary in
order to give all shareholders an opportunity to vote, because many of our
shareholders will be unable to attend the Annual Meeting in person. The cost
of soliciting proxies will be borne by the Company. When the proxy is prop-
erly executed and returned, the shares it represents will be voted at the
meeting in accordance with the directions noted thereon. If no choice is
specified, the proxy will be voted in accordance with the re-
commendations of the Board as set forth herein. Any shareholder returning a
proxy has the power to revoke it by written notice to the Secretary of the
Corporation at any time before it is voted, by a later dated proxy, or by
attending the meeting personally and voting. The Annual Report of the Company
is being mailed to all shareholders herewith. The proxy materials were first
mailed to all shareholders on or about April 6, 1998.
Capitol Transamerica Corporation is the parent company of Capitol
Indemnity Corporation, Capitol Specialty Insurance Corporation and Capitol
Facilities Corporation.
OUTSTANDING STOCK AND VOTING RIGHTS
As of the close of business on March 13, 1998, there were outstand-
ing and entitled to vote 11,294,126 shares of the Company's common stock.
Shareholders of record on March 13, 1998 will be entitled to one vote for each
share of common stock held. The Company has no other class of stock outstand-
ing.
<TABLE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of March 13, 1998 with respect to each person or entity known
by the Company to be the beneficial owner (as defined by the Securities and Exchange Commission) of more than 5% of
the Company's Common Voting Stock:
<CAPTION>
Amount & Nature of Percent
Name & Address Beneficial Ownership of Class
<S> <C> <C>
George A. Fait 2,093,898<F1> 17.54%
3100 Lake Mendota Drive
Madison, WI 53705
Neumeier Investment Counsel 1,051,101<F2> 9.31%
26435 Carmel Rancho Blvd.
Carmel, CA 93923
Robert E. Fait 629,786 5.58%
1399 Spring Valley Road
Burlington, WI 53105
<FN>
<F1> Includes 244,632 shares of record and held in Trust for his children and grandchildren to which
he denies beneficial ownership; 11,889 shares in a personal Keogh Retirement Plan; 30,161 shares
in the Company's ESOP and 6,712 shares in a personal IRA. This total also includes 112,500 shares
of stock issuable upon exercise of options granted and outstanding under Capitol Transamerica
Corporation's Stock Option Plan which are not included in the percent of class calculation.
<F2> This information was obtained from the Securities and Exchange Commission as filed by Neumeier
Investment Counsel under Schedule 13G requirements and dated February 16, 1998. The Schedule 13G
indicated that Neumeier has sole voting power over 539,421 shares and sole dispositive power over
1,051,101 shares held.
</FN>
</TABLE>
PROPOSAL 1. ELECTION OF DIRECTORS
As permitted by Wisconsin law, the Board of Directors of the Company
is divided into three classes, each class having a term of three years. Each
year the term of office of one class expires. This year the terms of a class
consisting of two directors expires and it is the intention of the Board that
the shares represented by proxy, unless otherwise indicated thereon, will be
voted for the re-election of Mr. Larry Burcalow and Mr. Michael J. Larson to
hold office for a term of three years until the Annual Meeting of Shareholders
in 2001. There is no reason to believe that either of the nominees will be un-
able or unwilling to serve as directors if elected, but if a nominee should be
unable or unwilling to serve, the shares represented by management proxies will
be voted for the election of such other person for the office of director as
the Board may recommend in place of such nominee.
Information with respect to the nominees and other directors is set
forth below:
<TABLE>
<CAPTION> Company's Common Stock
Name, Age, Principal Occupation Original Date Owned as of March 13, 1998
and Public Directorships<F1> of Election Shares Percent of Class<F2><F3>
<S> <C> <C> <C>
Class of 2001
(Terms will expire in 2001)
Larry Burcalow, Age 56, Waunakee, WI 1997 6,300 0.05%
Owner and President of Yahara Materials, Inc.;
Director, Bank One-Madison
Michael J. Larson, Age 56, Madison, WI 1991 6,867 0.05%
Vice President, American National Bank
Class of 2000
(Terms will expire in 2000)
George A. Fait, Age 71, Madison, WI; 1965 2,093,898 17.54%
Chairman of the Board and President of the Company;
Director, Bank One-Madison
Kenneth P. Urso, Age 63, Madison, WI; 1997 8,800 0.08%
Owner, Urso & Associates
Director, First Business Bank.
Class of 1999
(Terms will expire in 1999)
Paul J. Breitnauer, Age 58, Sun Prairie, WI; 1986 142,652 1.23%
Vice President & Treasuer of the Company.
Reinhart H. Postweiler, Age 68, Madison, WI; 1977 33,105 0.28%
Retired, formerly with Flad Affiliated Corporation;
Director, Bank One-Madison
<FN>
<F1> All of the named Directors and Nominees are also directors of Capitol Indemnity Corporation, Capitol
Specialty Insurance Corporation and Capitol Facilities Corporation, subsidiary companies. None of the
above directors are related and there are no arrangements or understandings between directors since each
is acting solely in their described capacity. There have been no known events during the past five years
which are material to the evaluation of the ability or integrity of any director of the Company.
<F2> Includes shares of stock issuable upon exercise of options granted and outstanding under Capitol
Transamerica Corporation's Stock Option Plans: 112,500 shares for George A. Fait; 3,355 shares for Paul
Breitnauer; 2,070 for Reinhart H. Postweiler; 750 shares for Michael J. Larson and 300 shares each for
Larry Burcalow and Kenneth Urso, which are not included in the percent of class calculation.
<F3> Included in the percent of class calculations are 11,889 shares in a personal Keogh Retirement Plan;
30,161 shares in the Company's ESOP and 6,712 shares in a personal IRA for George A. Fait and
10,262 shares in a personal IRA and 7,236 shares in the Company's ESOP for Paul J. Breitnauer.
</FN>
</TABLE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held four regular meetings during 1997. Each
director attended 100% of the meetings of the Board.
Responsibilities of the various committees of the Board were as
follows:
The Audit Committee is comprised of Messrs. Breitnauer, Burcalow,
Larson and Postweiler. The members of the committee are responsible for
assisting the Board of Directors in fulfilling its responsibilities in
connection with Capitol Transamerica Corporation's accounting and financial
reporting practices. The regularly scheduled Audit Committee meeting was
held November 24, 1997.
The Executive Committee is empowered by the By-Laws of the Company
to act on behalf of the Company during intervals between meetings of the Board
of Directors. The Executive Committee also functions as the Executive Compensa-
tion Committee, which is responsible for establising the criteria used to det-
ermine the annual compensation of the Chairman of the Board and all other
officers of the Company. The Committee consists of Messrs. Fait, Larson, and
Postweiler. The Executive Committee held four meetings during 1997.
The Investment Committee is responsible for the investment of the
Company's assets. The Committee consists of Messrs. Burcalow, Fait, and Larson.
The Investment Committee met four times during 1997 in conjunction with the
regular Board of Directors meetings.
The Nominating Committee makes recommendations to the Board regarding
nominees for election as directors. The committee consisted of Messrs.
Breitnauer, Postweiler and Urso. This Committee will also consider nominees
recommended by shareholders of the Company. Recommendations may be submitted in
writing to the Chairman of the Nominating Committee, Mr. Reinhart Postweiler,
at the Company's address. The Committee held one meeting during 1997.
The Sale & Acquisition Committee makes recommendations to the Board
concerning any prospective offer to purchase the Company or subsidiaries
and/or the possible acquisition of new companies or subsidiaries. The Com-
mittee consisted of Messrs. Burcalow, Fait, Larson and Urso. The Sale and
Acquisition Committee held four meetings during 1997 in conjunction with
the regular Board of Directors meetings.
The Stock Option Plan Committee is responsible for administering the
Company's stock option plans. The Committee consisted of Messrs. Breitnauer,
Fait, and Urso. The Stock Option Plan Committee held four meetings during
1997.
COMPENSATION OF DIRECTORS
During the 1997 fiscal year, Capitol Transamerica paid directors
fees of $1,000 per meeting to each director of Capitol Transamerica Corpora-
tion and its wholly-owned subsidiaries, except for directors who are also
officers of the companies who received no cash compensation for attendance at
meetings. A committee fee of $300 is paid to outside directors when meetings
are not held in conjunction with the regularly scheduled Board of Directors
meetings. For fiscal year 1997 Capitol Transamerica paid a total of $15,000 in
director's fees and each non-employee director received 300 unqualified stock
options for serving on the boards.
REPORT ON EXECUTIVE COMPENSATION
<TABLE>
The following Summary Compensation Table includes individual compensation information on all Executive
Officers earning in excess of $100,000 in each of the last three fiscal years. Such table includes all compensation
for services rendered in all capacities during the fiscal years ended December 31, 1997, 1996 and 1995 respectively.
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
All Other Options
Name/Title Year Salary Bonus<F1> Compensation<F2> (# Awarded shares)
<S> <C> <C> <C> <C> <C>
George A. Fait 1997 $350,000 $854,656 $15,180 -
Chairman of the Board 1996 $350,000 $623,040 35,298 112,500
& President 1995 $294,965 $286,145 15,440 16,500
Paul J. Breitnauer 1997 $101,873 $ -0- $ 6,742 -
Vice President & 1996 $100,723 $ -0- 13,156 1,500
Treasurer 1995 $ 98,230 $ 1,000 8,122 4,950
<FN>
<F1> Mr. Fait's bonuses for the years 1997, 1996 and 1995 were calculated on the results of the prior year and
paid in the first quarter of the following year. Therefore the schedule of bonus amounts shown would be for
the years 1996, 1995 and 1994. The bonus calculation is based on 5% of the excess of gross profits after a
10% return on beginning shareholders' equity.
<F2> Includes net contributions to the Corporation's ESOP of $12,930 in 1997, $33,048 in 1996, and $12,940 in
1995 for George A. Fait, and $4,492 in 1997, $10,906 in 1996 and $5,872 in 1995 for Paul J. Breitnauer and
also $2,250 annually, for each, to the company's 401(k) Plan.
</FN>
OPTION'S/SARS EXERCISED IN LAST FISCAL YEAR
The following table contains information for the Executives Officers listed below concerning
the exercise of options during 1997 and the value of unexercised options at year-end for the
Corporation's common stock.
<CAPTION>
Aggregated Options Exercised in Last Fiscal Year and FY-End Option Values
Number of Value of
Options Unexercised Unexercised
Acquired on Value Options at Options at
Exercise Realized 12/31/97 at 12/31/97
Name (#) ($) (#) ($)
<S> <C> <C> <C> <C>
George A. Fait<F1> 33,825 $383,075 112,500 $766,463
Paul J. Breitnauer<F2> 1,238 14,948 3,975 $ 42,845
<FN>
<F1> Value calculated on market price of $21.313 less base cost of $9.988 for exercised and $14.50 for
unexercised options.
<F2> Value calculated on market price of $21.313 less cost of $8.838 for exercised and $10.535 for unexercised options.
</FN>
</TABLE>
Compensation Committee Interlocks and Insider Participation
The members of the Corporation's Executive Compensation Committee for
1997 were George A. Fait, Michael J. Larson, and Reinhart H. Postweiler.
Mr. George A. Fait and Mr. Reinhart H. Postweiler serve as directors
of Bank One-Madison, and both serve on the Executive Compensation Committee of
Capitol Transamerica Corporation.
Executive Compensation Committee Report
The Executive Compensation Committee of the Board is composed of two
independent outside directors and Mr. George A. Fait, Chairman of the Board
and President of the Company. The Committee is responsible for setting and
administering the annual compensation of the Chairman of the Board and all
other officers of the Company. In 1996 the Committee established a base sal-
ary of $350,000 for the Chairman of the Board with a bonus based on 5% of
the excess of gross profits after a 10% return on beginning shareholders'
equity. This plan was confirmed and continued by the Executive Compensation
Committee for the calendar year 1998.
Executive Compensation Committee
George A. Fait, Michael J. Larson, Reinhart H. Postweiler
<TABLE>
Comparison of Ten Year Cumulative Total Return
The following graph demonstrates a ten year comparison of cumulative total return for Capitol Transamerica
Corporation, the Standard & Poor's 500 Index and Firemark Insurance Index (Property & Casualty Commercial Peer
Group).
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CATA $ 100 $ 122 $ 211 $ 246 $ 596 $ 470 $ 549 $ 554 $ 755 $1,166 $1,232
S&P 500 $ 100 $ 116 $ 153 $ 148 $ 192 $ 207 $ 227 $ 230 $ 315 $ 387 $ 515
Firemark $ 100 $ 104 $ 116 $ 106 $ 126 $ 145 $ 146 $ 139 $ 178 $ 218 $ 307
</TABLE>
COMPENSATION PLANS
Stock Option Plans
Capitol Transamerica Corporation has a stock option plan which was
adopted by the Board of Directors at the January 14, 1993 meeting and ratified
by the shareholders at the 1993 annual shareholders meeting. This plan re-
placed the 1981 Incentive Stock Option Plan. The purpose of the Plan is to
induce Employees to remain in the employ of the Company or its subsidiaries,
to attract and retain qualified non-employee directors and to encourage em-
ployees, key persons and non-employee directors to secure or increase on
reasonable terms their stock ownership in the Company. The Board of the Comp-
any believes that the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by those who are
primarily responsible for shaping and carrying out the long-range plans of the
Company and securing its continued growth and financial success.
<TABLE>
The table below summarizes certain information with respect to the Company's stock option plans and sets
forth all options exercised during the period January 1, 1997 through March 13, 1998.
<CAPTION>
Options Awarded Options Exercised Options Exercised # Options # Options Available
1-1-97 to 12-31-97 1-1-97 to 12-31-97 1-1-98 to 3-13-98 Outstanding For Award
<S> <C> <C> <C> <C> <C>
1981 Incentive Plan -0- 28,821 4,825 20,440 -0-
1993 Stock Option Plan 5,700 54,857 11,059 199,254 776,995
</TABLE>
All options under the Stock Option Plans were issued at 100% of the
fair market value on the date of grant. The market value on March 13, 1998 of
the common stock of CTC was quoted in the over-the-counter quotations of the
National Association of Securities Dealers at $20.50 bid and ask. There are
currently 94 employees, directors and executive officers that hold Stock
Options.
Employee Stock Ownership Plan
An Employee Stock Ownership Plan (ESOP) was adopted in 1988 for the
purpose of inducing employees to remain in the employ of the Company, to at-
tract new employees and to provide such employees the opportunity to partici-
pate in the ownership of the Corporation. All present and future employees of
the Company and its subsidiaries are eligible to participate in accordance with
the terms of the Plan. Presently there are 98,223 shares of the company stock
in the Plan which have been allocated to those employees who are eligible to
participate. There are currently 146 participants in the Plan. The market value
of the Plan at year end 1997 was $2,122,893.
Employee 401(k) Savings Plan
The Company has an Employer sponsored 401(k) Plan for all employees
who have been employed by the Company for 12 consecutive months. The company
contributes an amount equal to 150% of each participants eligible contribution
for the plan year that does not exceed 6% of compensation and shall be no
greater than $1,500 for each employee and $2,250 for the employer for a maximum
combined total of $3,750 for each limitation (plan) year. The employee may
contribute non-matching funds not to exceed 10% of gross annual salary.
Both the individual participants contribution and the Company's contribution
are non-forfeitable, with no reversion to the Company. Currently there are 135
participants in the Plan.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors, and persons who beneficially own more than ten percent
(10%) of the Company's stock, to file reports of ownership with the Securities
and Exchange Commission (SEC) and the NASDAQ Stock Exchange. Executive offi-
cers, directors and greater than ten percent (10%) beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers, directors and greater than ten percent (10%) beneficial
owners were complied with in 1997 with the following exception:
Mr. Jerry Underwood, Director of the Company's Fidelity & Surety De-
partment, did not file the required Form 144 relative to a sale of 3,300 shares
of Capitol Transamerica Corporation Stock on February 17, 1998.
PROPOSAL 2. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants selected by the Board for the
Company's fiscal year ending December 31, 1998 are Ernst & Young LLP, who also
served in that capacity for the fiscal year ended December 31, 1997. The Board
of Directors recommends an affirmative vote for this proposal.
A representative of the firm is expected to be present at the Annual
Meeting and will be afforded an opportunity to make any statement they wish and
to answer appropriate questions regarding the Company's financial statements.
SHAREHOLDERS PROPOSALS
The Corporation has not received any shareholder proposals to be
considered for presentation at the 1998 Annual Meeting. If a shareholder de-
sires to present a proposal for inclusion in next year's Proxy Statement and to
present such proposal at the 1999 Annual Meeting, the shareholder must submit
such proposal in writing to Capitol Transamerica Corporation, 4610 University
Avenue, Madison, Wisconsin 53705, Attention: Corporate Secretary, not later
than December 31, 1998.
OTHER BUSINESS
The meeting is being held for the purposes set forth in the Notice
accompanying this Proxy Statement. The Board of Directors of the Company does
not know of any other matters which may be presented at the meeting. In the
event that any matters other than those referred to in the accompanying Notice
properly come before the meeting or any adjournment thereof, it is anticipated
that the proxies will be voted according to the best judgment of the person
acting by authorization of these proxies.
CAPITOL TRANSAMERICA CORPORATION
Virgiline M. Schulte
April 6, 1998 Corporate Secretary
CAPITOL TRANSAMERICA CORPORATION
4610 UNIVERSITY AVE., MADISON, WI 53705
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints George A. Fait, Chairman of the Board,
as proxy, and Virgiline M. Schulte, Corporate Secretary, as the alternative
proxy, with power of substitution, to vote as indicated on reverse side, all
shares of stock of Capitol Transamerica Corporation of record in the name of
the undersigned at the close of business on March 13, 1998 at the Annual Meet-
ing of Shareholders of the Corporation to be held May 11, 1998, or any adjourn-
ment thereof.
PROXY NO. CAPITOL TRANSAMERICA CORPORATION NO. OF SHARES
The shares represented by this proxy will be voted as directed by the share-
holder. If no direction is given when the duly executed proxy is returned such
shares will be voted "FOR ALL" nominees in item 1 and "FOR" for item 2.
1. ELECTION OF DIRECTORS - Class of 2001 -Larry Burcalow and Michael J. Larson.
To withold authority to vote for any individual nominee, write nominee's
name on the line provided below.
FOR all nominees listed above WITHHOLD AUTHORITY
(except as marked)
2. The proposal to approve the appointment of Ernst & Young LLP as the
Company's independent auditors for 1998.
FOR AGAINST ABSTAIN
The undersigned hereby authorize the proxies, in their discretion, to vote
on any other business which may properly be brought before the meeting or
any adjournment therof.
Please mark, date and sign as your name appears on reverse side and return
in the enclosed envelope. If acting as executor, administrator, trustee,
guardian, etc., you should so indicate when signing. If the signer is a
corporation, please sign in full corporate name, by duly authorized officer.
Signature Signature Date
