SCHEDULE 14A INFORMATION
(Rule 14a-101)
Information Required in Proxy Statement
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
CAPITOL BANCORP LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CAPITOL BANCORP LTD.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
------------------------------------------
2) Form, Schedule or Registration Statement No.:
--------------------
3) Filing Party:
----------------------------------------------------
4) Date Filed:
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<PAGE>
[CAPITOL BANCORP LOGO]
March 24, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Capitol Bancorp Ltd. to be held at the Lansing Center, 333 East Michigan Avenue,
Lansing, Michigan, on Thursday, May 4, 2000, at 4:00 p.m. Eastern Time.
The attached Notice of the Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting. The meeting is for the purpose
of considering and acting upon the election of directors and a proposal to
approve a stock option plan for directors and executive officers.
During the meeting, we will also report on the operations of Capitol.
Directors and officers of Capitol will be present to respond to questions that
you may have.
Please sign, date and return the enclosed proxy card. If you attend the
Meeting, you may withdraw your proxy and vote in person, even if you have
previously mailed a proxy card.
Sincerely,
JOSEPH D. REID
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
CAPITOL BANCORP LTD.
One Business & Trade Center
200 Washington Square North
Lansing, Michigan 48933
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on Thursday, May 4, 2000
The 2000 Annual Meeting of the Stockholders of Capitol Bancorp Ltd. will be
held at the Lansing Center, 333 East Michigan Avenue, Lansing, Michigan on
Thursday, May 4, 2000 at 4:00 p.m. Eastern Time.
A proxy card and a proxy statement for the meeting are enclosed.
The meeting is for the purpose of considering and acting upon:
1. The election of 16 directors to hold office for one year and
until their successors are elected and qualified;
2. A proposal to approve the Capitol Bancorp 2000 Stock Incentive
Plan; and,
3. Such other matters as may properly come before the meeting or any
adjournments thereof.
The Board of Directors is not aware of any other business to come before
the meeting.
Action may be taken on any one of the foregoing proposals at the meeting on
the date specified, or on any dates to which, by original or later adjournment,
the meeting may be adjourned. Stockholders of record at the close of business on
March 10, 2000, are the stockholders entitled to vote at the meeting and any
adjournments thereof.
You are asked to fill in and sign the enclosed form of proxy which is
solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend the meeting, withdraw your
proxy and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
DAVID O'LEARY
Secretary
Lansing, Michigan
March 24, 2000
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. AN ADDRESSED ENVELOPE
IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
<PAGE>
CAPITOL BANCORP LTD.
One Business & Trade Center
200 Washington Square North
Lansing, Michigan 48933
ANNUAL MEETING OF STOCKHOLDERS
May 4, 2000
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Capitol Bancorp Ltd. to be used at
Capitol's 2000 Annual Meeting of Stockholders to be held at the Lansing Center,
333 East Michigan Avenue, Lansing, Michigan, on Thursday, May 4, 2000 at 4:00
p.m. Eastern Time. The accompanying notice of meeting and this proxy statement
are being mailed to stockholders on or about March 24, 2000.
REVOCATION OF PROXIES
Stockholders who execute proxies retain the right to revoke them at any
time. Unless revoked, the shares represented by such proxies will be voted at
the meeting and all adjournments thereof. Proxies may be revoked by written
notice to the Secretary or by the filing of a later proxy prior to a vote being
taken on a particular proposal at the meeting. A proxy will not be voted if a
particular stockholder attends the meeting and revokes his/her proxy by
notifying the Secretary at the meeting. Any stockholder who attends the meeting
and revokes his/her proxy may vote in person. Proxies solicited by Capitol's
Board of Directors will be voted according to the directions given therein.
Where no instructions are indicated, proxies will be voted FOR the nominees for
directors and FOR the proposed plan.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Stockholders of record as of the close of business on March 10, 2000 (the
record date), are entitled to one vote for each share then held. As of February
24, 2000, Capitol had 6,894,376 shares of common stock issued and outstanding.
The following table sets forth, as of February 24, 2000, certain
information as to each person (including any group as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934) who was known to be the
beneficial owner of more than 5% of Capitol's common stock as of that date, and
as to the shares of common stock beneficially owned by named executives that are
not also directors and by executive officers and directors of Capitol as a
group.
Name and Address of Shares of Percent of
Beneficial Owner Common Stock Common Stock
- ---------------- ------------ ------------
Joseph D. Reid 1,094,585(a) 15.27 %
Capitol Bancorp Ltd.
One Business & Trade Center
200 Washington Square North
Lansing, Michigan 48933
Lee W. Hendrickson 6,528(b) .09 %
Executive Vice President and Chief
Financial Officer of Capitol
David K. Powers 25,628(c) .37 %
Executive Vice President of Capitol
All Directors and Executive 2,215,864(d) 30.21 %
Officers as a group (29 persons)
- ----------
(a) Includes 273,473 options.
(b) Includes 2,400 options. Also includes 751 allocated shares held in
Capitol's Employee Stock Ownership Plan.
(c) Includes 2,400 options. Also includes 6,676 allocated shares held in
Capitol's Employee Stock Ownership Plan.
(d) Includes 440,835 options.
3
<PAGE>
ELECTION OF DIRECTORS
Capitol's bylaws establish that the number of directors shall be not less
than five nor more than twenty-five.
The persons named in the enclosed proxy intend to vote for the election of
the nominees named in this proxy statement unless it contains instructions to
the contrary. All nominees are willing to be elected and to serve in such
capacity for one year and until their successors are elected and qualified. If
any of the nominees becomes unavailable for election, which is not anticipated,
the persons named in the proxy will vote for such other nominee, if any, as may
be proposed by the Board of Directors. A majority of the common stock voting at
the meeting is required for the election of nominees to the Board of Directors.
Each of the nominees for election to the Board of Directors is currently a
member of Capitol's Board of Directors and has been a member of Capitol's Board
of Directors since the year shown in the table below (or, as to dates prior to
1988, Capitol National Bank), except as indicated.
The table below sets forth information as of February 24, 2000 regarding
the nominees based on the data furnished by them. They have held the principal
occupations shown for at least the past five years unless otherwise indicated.
The shares in this table do not include the ESOP shares voted by Messrs. Reid,
O'Leary and Carr as committee members representing the ESOP for which such
members disclaim beneficial ownership thereof except insofar as Mr. Carr is a
beneficiary of the ESOP trust. See "Executive Compensation".
The Board of Directors recommends a vote FOR all the recommended nominees
for election as a director.
NOMINEES FOR ELECTION TO SERVE UNTIL THE ANNUAL MEETING OF SHAREHOLDERS IN 2001
Year First Shares of Percent
Became A Common Stock of
Name and Principal Positions Age Director Owned (a) Outstanding
- ---------------------------- --- -------- --------- -----------
Joseph D. Reid 57 1982 1,094,585(b) 15.27%
Chairman of the Board, President
and Chief Executive Officer of
Capitol; Chairman of the Board
and Chief Executive Officer of
Sun Community Bancorp Limited
Robert C. Carr 60 1982 61,660(c) .89%
Treasurer and Executive Vice
President of Capitol
David O'Leary 69 1982 50,576 .73%
Secretary of Capitol;
Chairman, O'Leary Paint Company
Louis G. Allen 70 1989 608 .01%
Retired Bank Executive
Paul R. Ballard 50 1990 87,092(d) 1.27%
Executive Vice President of
Capitol; President and CEO
of Portage Commerce Bank
David L. Becker 64 1990 53,498 .78%
President, Becker Insurance
Agency, P.C
Douglas E. Crist 59 1982 52,958 .77%
President, Developers of
SW Florida, Inc.
James C. Epolito 45 1999 717 .01%
President and CEO, The
Accident Fund Company
4
<PAGE>
Year First Shares of Percent
Became A Common Stock of
Name and Principal Positions Age Director Owned (a) Outstanding
- ---------------------------- --- -------- --------- -----------
Gary A. Falkenberg 61 1982 41,741 .61%
Doctor of Osteopathic Medicine
Joel I. Ferguson 61 1982 42,405 .62%
Chairman, Ferguson Development,
LLC
Kathleen A. Gaskin 58 1982 31,006 .45%
Associate Broker/State Appraiser,
Tomie Raines, Inc. Realtors
H. Nicholas Genova 60 1992 18,248 .26%
Chairman and CEO, Washtenaw
News Company, Inc.; President,
H. N. Genova Development Company
L. Douglas Johns 56 1982 96,160 1.39%
President, Mid-Michigan Investment
Company
Michael L. Kasten 54 1990 79,684 1.16%
Managing Partner, Kasten
Investments,L.L.C.; Director
and Vice Chairman, Sun
Community Bancorp Limited
Leonard Maas 78 1995 100,507 1.46%
President, Gillisse Construction
Company (underground utility
construction); Partner, CP Limited
Partnership
Lyle W. Miller 56 1982 46,248 .67%
President, SERVCO, Inc. (provider
of credit card and computer
enhancement services)
- ----------
(a) Includes all shares as to which the nominee has voting power and/or
investment power, including shares held by entities owned and controlled,
and shares held by children residing in the same household or jointly with
spouse. This total does not reflect stock purchased through voluntary
participation in Capitol's Directors' deferred compensation plan.
(b) Includes 273,473 options.
(c) Includes 39,600 options. Also includes 12,863 allocated shares held in
Capitol's Employee Stock Ownership Plan.
(d) Includes 21,600 options. Also includes 9,940 allocated shares held in
Capitol's Employee Stock Ownership Plan.
5
<PAGE>
PROPOSAL TO APPROVE CAPITOL BANCORP 2000 STOCK OPTION PLAN
The Board of Directors of Capitol has approved, and recommends that the
shareholders approve, the adoption of the Capitol Bancorp Ltd. 2000 Stock
Incentive Plan for directors and executives of Capitol and its subsidiaries. The
Plan authorizes grants of non-qualified Stock Options.
The Board believes that using long-term incentives under the Plan will be
beneficial to Capitol as a means to promote the success and enhance the value of
Capitol by linking the personal interests of its directors and executives to
those of its shareholders and by providing such individuals with an incentive
for outstanding performance. These incentives also provide Capitol flexibility
in its ability to attract and retain the services of individuals upon whose
judgement, interest and special effort the successful conduct of Capitol's
operation is largely dependent. The Plan, if approved by shareholders, will have
an effective date of July 1, 2000. The following summary of the Plan is
qualified in its entirety by reference to the Plan, a copy of which is included
at the end of this proxy statement as Appendix A.
ADMINISTRATION
The Plan will be administered by either the Board or a committee appointed
by the Board consisting of at least two non-employee directors who also qualify
as "outside directors" under section 162(m) of the Internal Revenue Code of
1986, as amended. If the Board does not appoint a committee, any reference
herein to the committee shall be to the Board.
This committee will have the exclusive authority to administer the Plan,
including the power to determine eligibility, size of awards, exercise price,
and timing of awards and the acceleration or waiver of any vesting restriction.
ELIGIBILITY
Persons eligible to participate in the Plan include all directors and
executives of Capitol and its subsidiaries, as determined by the committee
provided that Capitol's Chairman and Chief Executive Officer is not eligible to
participate. As of February 24, 2000, there were approximately 242 directors and
86 executives of Capitol and its subsidiaries.
SHARES AVAILABLE
An aggregate of 600,000 shares of Capitol's common stock will be available
for grant under the Plan. If any option granted under the Plan terminates,
expires, or lapses for any reason, the shares subject to purchase pursuant to
such option again will be available for grant under the Plan. The maximum number
of shares of stock that may be subject to one or more awards to a single
participant under the Plan during any fiscal year is 60,000. On February 24,
2000, Capitol's common stock had a closing price of $12.25 as reported on the
Nasdaq Stock Market SM under the symbol CBCL.
DESCRIPTION OF THE AVAILABLE AWARDS
NON-QUALIFIED STOCK OPTIONS
Non-Qualified Stock Options (NQSO) are referred to as "non-qualified"
because they do not meet the requirements of, and are not eligible for, the
favorable tax treatment provided by Section 422 of the Internal Revenue Code.
It is the intention under the Plan that the exercise price of all NQSOs
shall not be less than the fair market value of Capitol's common stock on the
date of grant provided, however, that the committee may, in its discretion,
grant NQSOs with an exercise price of less than the fair market value on the
date of grant.
PAYMENT
The committee has discretion to determine the methods by which the exercise
price of an option may be paid, the form of payment including, without
limitation, cash, shares of stock, or other property, and the methods by which
shares of stock shall be delivered or deemed to be delivered to participants.
6
<PAGE>
FEDERAL TAX CONSEQUENCES
No taxable income will be realized by an optionee upon the grant of an
NQSO, nor is Capitol entitled to a tax deduction by reason of such grant. Upon
the exercise of an NQSO, the optionee will realize ordinary income 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 and Capitol will be entitled to a corresponding
tax deduction.
Upon a subsequent sale or other disposition of common stock acquired
through exercise of an NQSO, the optionee will realize capital gain or loss to
the extent of any intervening appreciation or depreciation. Such a resale by the
optionee will have no tax consequence to Capitol.
RECENT TAX CHANGES
Section 162(m) of the Code, adopted as part of the Revenue Reconciliation
Act of 1993, generally limits to $1 million the deduction that can be claimed by
any publicly-held corporation for compensation paid to any covered employee in
any taxable year. Performance-based compensation is outside the scope of the $1
million limitation and, hence, generally can be deducted by a publicly-held
corporation without regard to amount provided that, among other requirements,
such compensation is approved by shareholders. Among the items of
performance-based compensation that can be deducted without regard to amount
(assuming shareholder approval and other applicable requirements are satisfied)
is compensation associated with the exercise price of a stock option so long as
the option has an exercise price equal to or greater than the fair market value
of the underlying stock at the time of the option grant. All options granted
under the Plan that are intended to qualify as performance-based compensation
will have an exercise price at least equal to the fair market value of the
underlying stock on the date of grant.
AMENDMENT AND TERMINATION
The committee, subject to approval of the Board, may terminate, amend, or
modify the Plan at any time provided, however, that to the extent necessary and
desirable to comply with any applicable law, regulation, or stock exchange rule,
Capitol shall obtain shareholder approval of any amendment in such manner and to
such degree as required.
CHANGE OF CONTROL
In the event of a change of control of Capitol, all options and other share
based awards granted under the Plan shall become immediately exercisable.
VOTE REQUIRED
Adoption of the Plan requires approval of a majority of the outstanding
shares of stock who are present, or represented, and entitled to vote thereon,
at the annual meeting of shareholders.
The Board of Directors recommends a vote FOR the proposal to approve this
plan.
7
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors conducts its business through meetings of the Board
and its committees. During 1999, the Board of Directors held four meetings. All
the directors of Capitol attended at least 75% of the meetings of the Board of
Directors and committee meetings on which they served during this period, with
the exception of Mr. Ferguson who attended 50% of the meetings.
Directors who are not employees of Capitol or its subsidiaries are entitled
to receive an annual directors' fee ($6,000 in 2000). Directors entitled to
receive such fee may either receive the amount currently or elect to defer the
amount pursuant to a deferred compensation plan. Members of Capitol's Audit
Committee and Compensation Committee receive a fee of $500 for each committee
meeting attended.
Nonemployee directors of Capitol may either receive directors' fees
currently or elect to defer such fees through a deferred compensation plan.
Under the terms of that plan, directors' fees voluntarily deferred are remitted
to a trustee (Paragon Bank & Trust, a wholly-owned subsidiary of Capitol) and
such funds are invested in shares of Capitol's common stock in open market
transactions. As of February 24, 2000, the plan held 172,539 shares of Capitol's
common stock. The trustee has sole voting power over the shares held by the
plan; accordingly, the shares held by the plan are not included in the shares
attributed to each director in the table included elsewhere in this Proxy
Statement. However, shares held by the plan are included in the total of all
shares held by directors and officers as a group. Each director's participation
in the plan is voluntary and does not affect the amount of his/her director
fees.
COMMITTEES OF THE BOARD OF DIRECTORS
Capitol's Board of Directors has several committees, including an executive
committee, an audit committee and a compensation committee.
EXECUTIVE COMMITTEE
The Executive Committee is composed of Messrs. Reid, O'Leary, Ferguson,
Johns, Kasten and Miller. During 1999, the Executive Committee met five times.
The Executive Committee meets for the purpose of monitoring current operating
strategy and implementation of Capitol's business plan.
AUDIT COMMITTEE
The members of the Audit Committee are Messrs. Genova and Kasten and its
Chairman, Dr. Falkenberg.
The Audit Committee reviews the results of the independent auditors' audit
of Capitol's consolidated financial statements and evaluates policies,
procedures and results relating to the internal audit function and recommends to
the Board of Directors the selection of independent auditors. During 1999, the
Audit Committee met five times.
COMPENSATION COMMITTEE
The Compensation Committee consists of three directors, Mr. Kasten, Ms.
Gaskin and its Chairman, Mr. Miller, who are not employed by Capitol and are not
eligible to participate in any of Capitol's benefit plans other than Capitol's
Directors' Deferred Compensation Plan.
The Compensation Committee meets for the purpose of reviewing compensation
and benefit levels for Capitol's management and making related recommendations
to Capitol's Board of Directors. During 1999, three meetings of the Compensation
Committee were held.
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
Capitol's executive compensation structure and policies have been
established to attract, retain and motivate quality managerial talent necessary
to lead Capitol while attaining its business objectives and maximizing
shareholder value. Because of Capitol's evolution, it has not been necessary, in
the opinion of the Compensation Committee, to utilize external compensation
consultants for the purpose of determining compensation levels for executive
officers and other employees of Capitol. The Compensation Committee does,
however, review reports of various compensation surveys (including surveys which
are specifically applicable to compensation in the banking industry). In the
opinion of the Committee, Capitol's compensation levels are appropriate and
competitive insofar as is consistent with the objective stated above.
Compensation of executive officers of Capitol includes the following
elements:
1. Salary.
2. Incentive compensation in the form of discretionary bonuses payable in
cash and common stock based on meeting certain performance criteria
applicable to subsidiary and corporate-wide performance.
3. Discretionary awards of stock options.
4. An Executive Supplemental Income Program offered to certain key senior
officers of Capitol and its subsidiaries.
5. Participation in other benefit plans offered to employees, including
ESOP, 401(k), health insurance and other programs.
BASE SALARIES
Total salaries for Capitol's CEO and the next four most highly compensated
executive officers for 1999, 1998 and 1997 are shown on page 11. Such amounts
include compensation paid by subsidiaries of Capitol, which are not
wholly-owned, but have not been reduced to reflect Capitol's ownership
percentage of those subsidiaries. Base salaries at Capitol (exclusive of the
subsidiaries) in 1999 were $434,052, for Mr. Reid, $176,800 for Mr. Carr,
$165,000, for Mr. Ballard, $109,200 for Mr. Hendrickson, and $121,522 for Mr.
Powers.
In each of the years presented, annual salary amounts for the named
executive officers (including Capitol's CEO) have increased. During those
periods, asset growth and corporate development activities have been
significant. The growth in the number of banking subsidiaries has increased
significantly. Earnings in 1999 increased, compared to 1998, due in part to
asset growth and Capitol's aggressive expansion plans. Capitol's size, past
performance and ongoing development, in the opinion of the Compensation
Committee, do not establish a linear relationship between earnings and executive
compensation.
Amounts of annual salary and bonuses have been determined for the CEO on a
discretionary basis, consistent with the factors discussed above.
The CEO's compensation for 1999 was determined by the Compensation
Committee's review of qualitative factors which included effective
implementation of bank development strategies, significant asset and revenue
growth, shareholder value, asset quality and core earnings performance of
established bank subsidiaries. Although these factors have quantitative bases,
the Committee's review and consideration of CEO compensation is primarily
subjective and, hence, qualitative.
Amounts of annual salary and bonuses paid to the other named executive
officers were determined by the Compensation Committee after reviewing
recommendations made to the Committee by Capitol's CEO. Compensation amounts for
the other named executive officers, including salary and bonuses, were
determined subjectively, similarly to the qualitative factors described above
regarding determination of CEO compensation amounts.
COMPENSATION COMMITTEE
Lyle W. Miller, Chairman
Michael L. Kasten
Kathleen A. Gaskin
9
<PAGE>
STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
CAPITOL BANCORP LTD., NASDAQ MARKET INDEX, AND
SNL $1B - $5B BANK ASSET-SIZE INDEX
Below is a graph which summarizes the cumulative return experienced by
Capitol's shareholders over the last five years compared to the SNL $1B -$5B
Bank Asset-Size Index, and the cumulative total return on the NASDAQ Market
Value Index. (Broad Market Index). This presentation assumes that the value of
the investment in Capitol's common stock and each index was $100 on December 31,
1994 and that subsequent cash dividends were reinvested. The change in index was
made in 1999 based on Capitol's asset size at the beginning of the year.
[LINE GRAPH]
<TABLE>
<CAPTION>
PERIOD ENDING
----------------------------------------------------------
INDEX 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Capitol Bancorp Ltd. 100.00 114.24 193.29 438.03 363.49 183.96
NASDAQ - Total US* 100.00 141.33 173.89 213.07 300.25 542.43
SNL $500M-$1B Bank Index 100.00 132.76 165.97 269.80 265.28 245.56
SNL $1B-$5B Bank Index 100.00 134.48 174.33 290.73 290.06 266.58
</TABLE>
10
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes compensation paid to the CEO and the next
four most highly compensated executive officers of Capitol for each of the three
years in the period ended December 31, 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term Compensation
----------------------------
Annual Compensation Awards Payouts
------------------------------ ------------------ -------
Other
Name and Annual Restricted Number of
Principal Compen- Stock Options/ LTIP All Other
Position/Year Salary Bonus sation(a) Award(s) SARs Payouts Compensation(b)
- ------------- ------ ----- --------- -------- ---- ------- ---------------
<S> <C> <C> <C> <C> <C>
Joseph D. Reid
Chairman, President
and CEO of Capitol
and Chairman and
CEO of Sun Community
Bancorp Limited:
1999 $ 687,736(c) $ -0- -0- -0- $ 31,706(d)
1998 518,500(c) -0- -0- -0- 5,000
1997 300,100 -0- 146,836 -0- 4,750
Robert C. Carr
Treasurer and Executive
Vice President of
Capitol:
1999 193,627(c) 33,500 -0- -0- 11,064
1998 170,000 33,500 -0- -0- 16,088
1997 154,327 33,500 3,600 -0- 39,745
Paul R. Ballard
Executive Vice President
of Capitol; President and
CEO, Portage Commerce Bank:
1999 181,827(c) 30,000 -0- -0- 9,590
1998 150,000 30,000 -0- -0- 14,948
1997 133,846 30,000 3,600 -0- 19,225
Lee W. Hendrickson
Executive Vice President
and Chief Financial
Officer of Capitol and of
Sun Community Bancorp
Limited:
1999 177,854(c) 15,000 -0- -0- 5,767
1998 130,961(c) 15,000 -0- -0- 8,481
1997 47,692 15,000 2,400 -0- 6,675
David K. Powers
Executive Vice President:
1999 121,933 20,000 -0- -0- 8,322
1998 116,848 20,000 -0- -0- 12,596
1997 106,729 20,000 2,400 -0- 23,413
</TABLE>
- ----------
(a) No amounts greater than $50,000, or 10% of stated salary amount.
(b) Amounts contributed by Capitol's ESOP and 401k programs to the extent
applicable.
(c) Includes amounts paid by subsidiaries of Capitol which are not
wholly-owned. Amounts of salary and other compensation, as shown, have not
been reduced pro rata to reflect Capitol's ownership percentage of
subsidiaries.
(d) Includes $4,658 which was contributed from the Capitol 401k program and
$27,048 representing reimbursement for interest paid on a loan from
Capitol.
11
<PAGE>
Capitol has an employment agreement with Joseph D. Reid under which he
serves as Chairman of the Board, President and Chief Executive Officer of
Capitol. The term of the employment agreement is three years. It is
automatically extended for an additional year each January 1 unless either party
gives written notice to the contrary. Mr. Reid's employment agreement requires
Capitol to issue Mr. Reid certain stock options in the event of any new issuance
of common stock equal to 15% of the sum of the additional shares issued and the
shares subject to the options. The exercise price of additional stock options is
established by the Board of Directors based on the fair market price of common
stock at the time of issuance of the option but not less than $6.06 per share.
Each option expires seven years after its date of issuance.
In 1999, Capitol negotiated a reduction of Mr. Reid's benefit from 15% to
10% with the resulting 5% issuable as a pool of stock options to be granted to
other officers and directors of Capitol at the discretion of the Board of
Directors. The option pool will terminate effective July 1, 2000 in the event
that the Capitol Bancorp 2000 Stock Option Plan is approved. In exchange for the
reduced benefit, Capitol agreed to a one-time exercise of previously granted
stock options with an aggregate exercise price of $1.6 million funded by a note
receivable of $1.9 million from Mr. Reid. The note bears interest at a fixed
rate. As part of the terms of this agreement, Mr. Reid's compensation will be
increased in an amount equal to the interest due on the note receivable. Under
certain circumstances, such as the death of Mr. Reid, the note will be forgiven.
The death benefit is covered by company-owned life insurance.
Sun Community Bancorp Limited, a 51%-owned subsidiary of Capitol, has an
employment agreement with Mr. Reid under which he serves as its Chairman and
CEO. The agreement provides for an annual salary, discretionary bonuses and
stock options. The term of the agreement is three years. It is automatically
renewed for an additional year each January 1 unless either party gives written
notice to the contrary.
Capitol also has an agreement whereby, upon Mr. Reid's death, his estate
may request Capitol to purchase, from the estate, up to $2.5 million of
Capitol's common stock then held by the estate. Capitol's obligation is covered
by company-owned life insurance.
Capitol has employment agreements with Paul Ballard, Robert Carr, David
Powers and Lee Hendrickson. Except for the salaries, the terms of each agreement
currently in force are substantially identical. The term of each agreement is
three years and is extended automatically for one year each January 1 unless
either party gives written notice to the contrary. In addition to their
salaries, each employee is entitled to various fringe benefits and a
discretionary bonus. All employees are entitled to disability benefits under
prescribed circumstances.
Capitol and/or its subsidiaries have entered into executive supplemental
income agreements with Joseph Reid, Paul Ballard, Robert Carr, David Powers and
Lee Hendrickson. The agreements provide for the payment to each employee or
designated beneficiary an annual benefit which is approximately equal to the
annual base salary of each employee for a period of fifteen years in the event
of either the employee's retirement or the death of the employee before
attaining retirement age. In the event of a change in control of Capitol (as
defined in the agreements) which is not approved by Capitol's Board of
Directors, each employee can retire with full benefits at any time after
attaining the age of 55 without approval of the Board of Directors. The benefit
liabilities under the agreements are covered by funded insurance contracts by
Capitol and/or its subsidiaries.
Aggregated Options/SARs Exercised in Last Fiscal Year and
Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares Fiscal Year-End Fiscal Year-End
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable(b) Unexercisable(b)
- ---- ----------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Joseph D. Reid:
Capitol Bancorp Ltd. 199,646 $ 635,455 (a) 273,473 $ 123,661 (c)
Sun Community
Bancorp Limited -0- -0- 275,194 549,600 (d)
Robert C. Carr -0- -0- 39,600 79,030 (c)
Paul R. Ballard -0- -0- 21,600 38,580 (c)
Lee W. Hendrickson:
Capitol Bancorp Ltd. -0- -0- 2,400 -0-(c)
Sun Community
Bancorp Limited -0- -0- 10,500 22,500 (d)
David K. Powers -0- -0- 2,400 -0-(c)
</TABLE>
- ----------
(a) Based on approximate average market price per share during month of
exercise less exercise price of stock options, multiplied by number of
stock options exercised.
(b) All outstanding options are currently exercisable.
(c) Capitol's common stock is traded on The Nasdaq Stock Market SM under the
symbol CBCL. Value is based on December 31, 1999 closing price of $10.375
per share as reported by Nasdaq.
(d) Sun's common stock is traded on The Nasdaq Stock Market SM under the symbol
SCBL. Value is based on December 31, 1999 closing price of $9.00 per share
as reported by Nasdaq.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Portage Commerce Bank leases its primary banking facility from Portage
Commerce Investors LLC. Messrs. Kasten and Becker are members of the limited
liability leasing entity. Rent paid by Portage Commerce Bank to the leasing
entity amounted to $190,000 in 1999. The lease rate represents what Capitol
believes to be fair market value in this market. All leasing arrangements which
involve insiders are reported to bank regulatory agencies prior to their
commencement.
Brighton Commerce Bank leases its primary banking facility from Tri-O
Development. Three of Mr. O'Leary's adult children are members of the leasing
entity. Rent paid by Brighton Commerce Bank to the leasing entity amounted to
$227,000 in 1999. The lease rate represents what Capitol believes to be fair
market value in this market. All leasing arrangements which involve insiders are
reported to bank regulatory agencies prior to their commencement.
Capitol and Capitol National Bank paid rent of $347,000 during 1999 for
their principal offices at One Business & Trade Center, 200 Washington Square
North, Lansing, Michigan to Business & Trade Center Limited, a Michigan limited
partnership, under lease agreements with expiration dates ranging from 2000 to
2003 and portions of which are renewable for periods of 2.5 years. Joseph D.
Reid and L. Douglas Johns are partners of the Partnership. The lease rate
represents what Capitol believes to be fair market value in this market. All
leasing arrangements which involve insiders are reported to bank regulatory
agencies prior to their commencement.
Cristin Reid English is Capitol's General Counsel and also serves as
General Counsel of Sun Community Bancorp Limited, Nevada Community Bancorp
Limited and Indiana Community Bancorp Limited. Ms. English is Mr. Reid's
daughter. In 1999, Ms. English received salary excluding expense reimbursement
totaling $55,060 from Capitol, $16,827 from Indiana Community Bancorp Limited,
$59,473 from Sun Community Bancorp Limited and $8,654 from Nevada Community
Bancorp Limited as officer compensation. Such amounts have not been reduced to
reflect the impact of Capitol's ownership percentage of the affiliated
subsidiaries.
Capitol used the English Law Firm in 1999, of which Brian English is the
President. Mr. English is the husband of Cristin Reid English and the son-in-law
of Mr. Reid. The firm was paid $13,320 by Capitol, its bank subsidiaries, and
Indiana Community Bancorp Limited, $48,000 by Sun Community Bancorp Limited for
work relating to Y2K preparedness, and $45,245 was paid by Sun Community Bancorp
Limited, Nevada Community Bancorp Limited and their banking subsidiaries.
Capitol and some of its bank subsidiaries utilize the law firm of Lasky
Fifarek & Hogan from time to time. Charles L. Lasky is president of that law
firm and is Mr. Reid's brother-in-law. Amounts paid by Capitol and its
subsidiaries to the law firm amounted to $152,000 in 1999. Mr. Lasky is a member
of the Board of Directors of Capitol's Nevada bank subsidiaries.
Capitol's banking subsidiaries have, in the normal course of business, made
loans to certain directors and officers of Capitol and its subsidiaries, and to
organizations in which certain directors and officers have an interest. As of
December 31, 1999, the outstanding principal balance of such loans was $65.2
million representing 119.3% of stockholders' equity. In the opinion of
management, such loans were made in the ordinary course of business and were
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with unrelated
parties and did not involve more than the normal risk of collectibility or
present other unfavorable features. Capitol has a written policy that all loans
to, and all transactions with, Capitol's officers, directors, affiliates and/or
shareholders holding 10% or more of Capitol 's common stock will be made or
entered into for bona fide business purposes, on terms no less favorable than
could be made to, or obtained from, unaffiliated parties, and shall be approved
by a majority of Capitol's directors, including a majority of the independent
disinterested directors of Capitol.
Capitol and its subsidiaries, on a consolidated basis, own approximately
20% of the outstanding common stock of Access BIDCO, Incorporated, with an
aggregate carrying value of $895,000 at December 31, 1999. Access BIDCO is a
business and industrial development corporation, regulated by the Michigan
Financial Institutions Bureau which is the same state agency that regulates
state-chartered commercial banks and other state-chartered financial
institutions. As a Michigan BIDCO, Access BIDCO is a non-depository financial
institution engaged in making loans and providing other financing and management
assistance to Michigan businesses as permitted under the Michigan BIDCO Act.
Joseph D. Reid, Chairman and Chief Executive Officer of Access BIDCO,
Incorporated serves as a director of Access BIDCO and its majority-owned
subsidiary, Onset BIDCO. In his capacity as an executive officer of Access
BIDCO, Mr. Reid received cash compensation in 1999 in the form of a salary in
the amount of $100,000. Mr. Reid also owns 4.5% of the outstanding common stock
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<PAGE>
of Access BIDCO. In addition to the relationship between Mr. Reid and Access
BIDCO, Executive Vice President and Chief Financial Officer of Capitol, Lee W.
Hendrickson, serves as Vice President, Chief Financial Officer, and a director
of Access BIDCO and its majority-owned subsidiary. Mr. Hendrickson received a
salary from Access BIDCO for his services as an executive officer of Access
BIDCO. Cristin Reid English, General Counsel of Capitol Bancorp is a director of
Access BIDCO, and also a director of its majority-owned subsidiary.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
BDO Seidman, LLP served as independent auditors for Capitol for the year
ended December 31, 1999. Representatives of BDO Seidman, LLP will be present at
the meeting to respond to appropriate questions and will have the opportunity to
make a statement if they desire to do so.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, including
matters relating to the conduct of the meeting, it is intended that proxies in
the accompanying form will be voted in respect thereof in accordance with the
judgment of those voting the proxies.
MISCELLANEOUS
The cost of solicitation of proxies will be borne by Capitol. In addition
to solicitations by mail, directors, officers and regular employees of Capitol
may solicit proxies personally or by telephone without additional compensation.
Capitol 's 1999 Annual Report to Stockholders is being provided herewith.
Any stockholder who does not receive a copy of the annual report may obtain a
copy by writing Capitol. The annual report also may be viewed by accessing
Capitol's web site at http:\\www.capitolbancorp.com. The annual report is not to
be treated as a part of the proxy solicitation material nor as having been
incorporated herein by reference.
FORM 10-K
A copy of Capitol 's 1999 Form 10-K, without exhibits, is available to
stockholders without charge upon written request to: Capitol Bancorp Ltd., One
Business & Trade Center, 200 Washington Square North, Lansing, Michigan 48933,
Attention: Linda D. Pavona, Vice President.
Form 10-K, and certain other periodic filings, are filed with the
Securities and Exchange Commission. The SEC maintains an Internet web site that
contains reports, proxy and information statements and other information
regarding companies which file electronically (which includes Capitol). The
SEC's web site address is http:\\www.sec.gov. Capitol's filings with the SEC can
also be accessed through Capitol's web site, http:\\www.capitolbancorp.com.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in Capitol's proxy material for next
year's annual meeting of stockholders, any stockholder proposal to take action
at such meeting must be received at Capitol's main office at One Business &
Trade Center, 200 Washington Square North, Lansing, Michigan 48933, no later
than November 21, 2000. Any such proposal shall be subject to the requirements
of the proxy rules adopted under the Securities Exchange Act of 1934, as
amended.
BY ORDER OF THE BOARD OF DIRECTORS,
JOSEPH D. REID
Chairman of the Board
Lansing, Michigan
March 24, 2000
<PAGE>
APPENDIX A
CAPITOL BANCORP LTD. 2000 STOCK INCENTIVE PLAN
ARTICLE 1 PURPOSE
1.1 GENERAL. The purpose of the Capitol Bancorp Ltd. 2000 Stock Incentive
Plan (the "Plan") is to promote the success, and enhance the value, of Capitol
Bancorp Ltd. (the "Corporation") by linking the personal interests of the
directors and executives of the Corporation or a Subsidiary to those of the
Corporation's shareholders and by providing such individuals with an incentive
for outstanding performance in order to generate superior returns to
shareholders of the Corporation. The Plan is further intended to provide
flexibility to the Corporation in its ability to motivate, attract, and retain
the services of directors and executives of the Corporation or a Subsidiary upon
whose judgment, interest, and special effort the successful conduct of the
Corporation's operation is largely dependent.
ARTICLE 2 EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan is effective as of July 1, 2000 (the
"Effective Date").
ARTICLE 3 DEFINITIONS AND CONSTRUCTION
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Sections 1.1 or 2.1 unless a clearly different meaning is required
by the context. The following words and phrases shall have the following
meanings:
(a) "Board" means the Board of Directors of the Corporation.
(b) "Cause" (except as otherwise provided in an Option Agreement)
means if the Committee, in its reasonable and good faith discretion, determines
that the director or executive of the Corporation or a Subsidiary (i) has
developed or pursued interests substantially adverse to the Corporation or a
Subsidiary, (ii) materially breached any employment, engagement, or
confidentiality agreement, (iii) has not devoted all or substantially all of his
or her business time, effort and attention to the affairs of the Corporation or
a Subsidiary (or such lesser amount as has been agreed to by the Corporation or
a Subsidiary), (iv) is convicted of a felony involving moral turpitude, or (v)
has engaged in activities or omissions that are detrimental to the well-being of
the Corporation or a Subsidiary.
(c) "Change of Control" means any of the following:
(1) any merger of the Corporation in which the Corporation is not
the continuing or surviving entity, or pursuant to which Stock would be
converted into cash, securities or other property, other than a merger of the
Corporation into an affiliate or in which the holders of the Corporation's Stock
immediately prior to the merger have the same proportionate ownership of
beneficial interest of common stock or other voting securities of the surviving
entity immediately after the merger;
(2) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of assets or earning power
aggregating more than 50% of the assets or earning power of the Corporation and
its Subsidiaries (taken as a whole), other than pursuant to a sale-leaseback,
structured finance, or other form of financing transaction;
(3) the shareholders of the Corporation shall approve any plan or
proposal for liquidation or dissolution of the Corporation;
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<PAGE>
(4) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than any current shareholder or affiliate
of the Corporation or any employee benefit plan of the Corporation or any
Subsidiary or any entity holding shares of capital stock of the Corporation for
or pursuant to the terms of any such employee benefit plan in its role as an
agent or trustee for such plan, shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 50% or more of the
Corporation's outstanding Stock.
(a) "Code" means the Internal Revenue Code of 1986, as amended.
(b) "Committee" means the committee of the Board described in Article
4.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(d) "Fair Market Value" means, as of any given date, the fair market
value of Stock on a particular date determined by such methods or procedures as
may be established from time to time by the Committee. Unless otherwise
determined by the Committee, the Fair Market Value of Stock as of any date shall
be the closing price for the Stock as reported on the NASDAQ National Market
System (or on any national securities exchange on which the Stock is then
listed) for that date or, if no closing price is so reported for that date, the
closing price on the next preceding date for which a closing price was reported.
(e) "Non-Employee Director" means a member of the Board who qualifies
as a "Non-Employee Director" as defined in Rule 16b-3(b)(3) of the Exchange Act,
or any successor definition adopted by the Board.
(f) "Non-Qualified Stock Option" means an Option that is not intended
to be an incentive stock option defined in Code Section 422.
(g) "Option" means a right granted to a Participant under Article 7 of
the Plan to purchase Stock pursuant to a Non-Qualified Stock Option at a
specified price during specified time periods.
(h) "Option Agreement" means any written agreement, contract, or other
instrument or document evidencing an Option.
(i) "Participant" means a person who, as a director or executive of
the Corporation or any Subsidiary, has been granted an Option under the Plan.
(j) "Stock" means the common stock of the Corporation or the common
stock of a Subsidiary as designated by the Committee at the date of grant or
otherwise.
(k) "Subsidiary" means any corporation of which a majority of the
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Corporation.
ARTICLE 4 ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Board or a Committee
appointed by, and which serves at the discretion of, the Board. If the Board
appoints a Committee, the Committee shall consist of at least two individuals,
each of whom qualifies as (i) a Non-Employee Director, and (ii) an "outside
director" under Code Section 162(m) and the regulations issued thereunder.
Reference to the Committee shall refer to the Board if the Board does not
appoint a Committee.
4.2 ACTION BY THE COMMITTEE. A majority of the Committee shall constitute a
quorum. The acts of a majority of the members present at any meeting at which a
quorum is present and acts approved in writing by a majority of the Committee in
lieu of a meeting shall be deemed the acts of the Committee. Each member of the
Committee is entitled to, in good faith, rely or act upon any report or other
information furnished to that member by any officer or other employee of the
16
<PAGE>
Corporation or any Subsidiary, the Corporation's independent certified public
accountants, or any executive compensation consultant or other professional
retained by the Corporation to assist in the administration of the Plan.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority, and discretion to:
(a) Designate Participants to receive Options;
(b) Determine the number of Options to be granted and the number of
shares of Stock to which an Option will relate;
(c) Determine the terms and conditions of any Option granted under the
Plan including but not limited to, the exercise price, grant price, or purchase
price, any restrictions or limitations on the Option, any schedule for vesting
or lapse of forfeiture restrictions or restrictions on the exercisability of an
Option, and accelerations or waivers thereof, based in each case on such
considerations as the Committee in its sole discretion determines;
(d) Amend, modify, or terminate any outstanding Option, with the
Participant's consent unless the Committee has the authority to amend, modify,
or terminate an Option without the Participant's consent under any other
provision of the Plan;
(e) Determine whether, to what extent, and under what circumstances an
Option may be settled in, or the exercise price of an Option may be paid in,
cash, Stock, or other property, or an Option may be canceled, forfeited, or
surrendered;
(f) Prescribe the form of each Option Agreement, which need not be
identical for each Participant;
(g) Decide all other matters that must be determined in connection
with an Option;
(h) Establish, adopt, or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan; and
(i) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to administer
the Plan.
4.4 DECISIONS BINDING. The Committee's interpretation of the Plan, any
Options granted under the Plan, any Option Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5 SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment provided in Section 9.1, the
aggregate number of shares of Stock reserved and available for grant under the
Plan shall be 600,000.
5.2 LAPSED OPTIONS. To the extent that an Option terminates, expires, or
lapses for any reason, any shares of Stock subject to the Option will again be
available for the grant of an Option under the Plan.
5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Option may
consist, in whole or in part, of authorized and unissued Stock, treasury stock
or Stock purchased on the open market.
17
<PAGE>
5.4 LIMITATION ON NUMBER OF SHARES SUBJECT TO OPTIONS. Notwithstanding any
provision in the Plan to the contrary, and subject to the adjustment in Section
9.1, the maximum number of shares of Stock with respect to one or more Options
that may be granted to any one Participant during the Corporation's fiscal year
shall be 10,000.
ARTICLE 6 ELIGIBILITY AND PARTICIPATION
6.1 ELIGIBILITY.
(a) GENERAL. Persons eligible to participate in this Plan include all
directors and executives of the Corporation or a Subsidiary, as determined by
the Committee, provided that the Chairman and Chief Executive Officer of the
Corporation shall not be eligible to participate in the Plan.
(b) FOREIGN PARTICIPANTS. In order to assure the viability of Options
granted to Participants employed in foreign countries, the Committee may provide
for such special terms as it may consider necessary or appropriate to
accommodate differences in local law, tax policy, or custom. Moreover, the
Committee may approve such supplements to, or amendments, restatements, or
alternative versions of the Plan as it may consider necessary or appropriate for
such purposes without thereby affecting the terms of the Plan as in effect for
any other purpose provided, however, that no such supplements, amendments,
restatements, or alternative versions shall increase the share limitations
contained in Section 5.1 of the Plan.
6.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from among all eligible individuals,
those to whom Options shall be granted and shall determine the nature and amount
of each Option. No individual shall have any right to be granted an Option under
this Plan.
ARTICLE 7 STOCK OPTIONS
7.1 GENERAL. The Committee is authorized to grant Options to Participants
at any time prior to the termination of the Plan on the following terms and
conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an
Option shall be determined by the Committee and set forth in the Option
Agreement. It is the intention under the Plan that the exercise price for any
Option shall not be less than the Fair Market Value as of the date of grant
provided, however, that the Committee may, in its discretion, grant Options
(other than Options that are intended to qualify as performance-based
compensation under Code Section 162(m)) with an exercise price of less than Fair
Market Value on the date of grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part. The
Committee shall also determine the performance or other conditions, if any, that
must be satisfied before all or part of an Option may be exercised.
(c) PAYMENT. The Committee shall determine the methods by which the
exercise price of an Option may be paid, the form of payment, including, without
limitation, cash, shares of Stock (through actual tender or by attestation), or
other property (including broker-assisted "cashless exercise" arrangements), and
the methods by which shares of Stock shall be delivered or deemed to be
delivered to Participants.
ARTICLE 8 PROVISIONS APPLICABLE TO OPTIONS
8.1 EXCHANGE PROVISIONS. The Committee may at any time offer to exchange or
buy out any previously granted Option for a payment in cash, Stock, or another
Option, based on the terms and conditions the Committee determines and
communicates to the Participant at the time the offer is made.
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<PAGE>
8.2 FORM OF PAYMENT FOR OPTIONS. Subject to the terms of the Plan and any
applicable law or Option Agreement, payments or transfers to be made by the
Corporation or a Subsidiary on the grant or exercise of an Option may be made in
such forms as the Committee determines at or after the time of grant, including
without limitation, cash, Stock, promissory note, or other property, or any
combination, and may be made in a single payment or transfer, in installments,
or on a deferred basis, in each case determined in accordance with rules adopted
by, and at the discretion of, the Committee.
8.3 LIMITS ON TRANSFER. No right or interest of a Participant in any Option
may be pledged, encumbered, or hypothecated to or in favor of any party other
than the Corporation or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Corporation or a Subsidiary. Except as otherwise provided by the Committee, no
Option shall be assignable or transferable by a Participant other than by will
or the laws of descent and distribution.
8.4 BENEFICIARIES. Notwithstanding Section 8.3, a Participant may, in the
manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Option upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Option Agreement applicable to the
Participant, except to the extent the Plan and Option Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If the Participant is married, a designation of a person other
than the Participant's spouse as his beneficiary with respect to more than 50
percent of the Participant's interest in the Option shall not be effective
without the written consent of the Participant's spouse. If no beneficiary has
been designated or survives the Participant, payment shall be made to the person
entitled thereto under the Participant's will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be changed
or revoked by a Participant at any time provided the change or revocation is
filed with the Committee.
8.5 STOCK CERTIFICATES. All Stock certificates delivered under the Plan are
subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with Federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on with the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate to reference restrictions
applicable to the Stock.
8.6 ACCELERATION UPON A CHANGE OF CONTROL. If a Change of Control occurs,
all outstanding Options shall become fully exercisable. Upon, or in anticipation
of, such an event, the Committee may cause every Option outstanding hereunder to
terminate at a specific time in the future and shall give each Participant the
right to exercise Options during a period of time as the Committee, in its sole
and absolute discretion, shall determine.
ARTICLE 9 CHANGES IN CAPITAL STRUCTURE
9.1 GENERAL. In the event a stock dividend is declared upon the Stock, the
shares of Stock then subject to each Option (and the number of shares subject
thereto) shall be increased proportionately without any change in the aggregate
purchase price therefor. In the event the Stock shall be changed into or
exchanged for a different number or class of shares of Stock or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such share of Stock then subject to each Option the number and class of
shares of Stock into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to each Option.
ARTICLE 10 AMENDMENT, MODIFICATION, AND TERMINATION
10.1 AMENDMENT, MODIFICATION, AND TERMINATION. With the approval of the
Board, at any time and from time to time, the Committee may terminate, amend, or
modify the Plan provided, however, that to the extent necessary and desirable to
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<PAGE>
comply with any applicable law, regulation, or stock exchange rule, the
Corporation shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.
10.2 OPTIONS PREVIOUSLY GRANTED. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Option previously
granted under the Plan, without the written consent of the Participant.
ARTICLE 11 GENERAL PROVISIONS
11.1 NO RIGHTS TO OPTIONS. No Participant, director, employee, or other
person shall have any claim to be granted any Option under the Plan, and neither
the Corporation nor the Committee is obligated to treat Participants, directors,
employees, and other persons uniformly.
11.2 NO SHAREHOLDERS RIGHTS. No Option gives the Participant any of the
rights of a shareholder of the Corporation unless and until shares of Stock are
in fact issued to such person in connection with such Option.
11.3 WITHHOLDING. The Corporation or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to remit
to the Corporation, an amount sufficient to satisfy Federal, state, and local
taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of this Plan.
11.4 NO RIGHT TO EMPLOYMENT OR SERVICES. Nothing in the Plan or any Option
Agreement shall interfere with or limit in any way the right of the Corporation
or any Subsidiary to terminate any Participant's employment or service at any
time, nor confer upon any Participant any right to continue in the employ or
service of the Corporation or any Subsidiary.
11.5 UNFUNDED STATUS OF OPTIONS. The Plan is intended to be an "unfunded"
plan for incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Option, nothing contained in the Plan or any Option
Agreement shall give the Participant any rights that are greater than those of a
general creditor of the Corporation or any Subsidiary.
11.6 INDEMNIFICATION. To the extent allowable under applicable law, each
member of the Committee or of the Board shall be indemnified and held harmless
by the Corporation from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by such member in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure
to act under the Plan and against and from any and all amounts paid by him or
her in satisfaction of judgment in such action, suit, or proceeding against him
or her provided he or she gives the Corporation an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Corporation's Articles of Incorporation or By-Laws, as
a matter of law, or otherwise, or any power that the Corporation may have to
indemnify them or hold them harmless.
11.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Corporation or any Subsidiary.
11.8 EXPENSES. The expenses of administering the Plan shall be borne by the
Corporation and its Subsidiaries.
11.9 TITLES AND HEADINGS. The titles and headings of the Sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
20
<PAGE>
11.10 FRACTIONAL SHARES. No fractional shares of Stock shall be issued and
the Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up or down as appropriate.
11.11 SECURITIES LAW COMPLIANCE. With respect to any person who is, on the
relevant date, obligated to file reports under Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Committee fails to so comply, it
shall be void to the extent permitted by law and voidable as deemed advisable by
the Committee.
11.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Corporation
to make payment of Options in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Corporation shall be under no obligation to
register under the Securities Act of 1933, as amended (the "1933 Act"), any of
the shares of Stock paid under the Plan. If the shares paid under the Plan may
in certain circumstances be exempt from registration under the 1933 Act, the
Corporation may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
11.13 GOVERNING LAW. The Plan and all Option Agreements shall be construed
in accordance with and governed by the laws of the State of Michigan.
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<PAGE>
[FRONT OF CARD]
CAPITOL BANCORP LTD. PROXY
One Business & Trade Center
200 Washington Square North
Lansing, MI 48933
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph D. Reid and David O'Leary as
Proxies, each with the power to appoint his substitute and hereby authorizes
them to represent and to vote as designated below, all the shares of Common
Stock of Capitol Bancorp Ltd. held of record by the undersigned on March 10,
2000 at the Annual Meeting of Shareholders to be held on May 4, 2000, or any
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. Election of Directors:
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary) for all nominees listed below
Louis G. Allen Douglas E. Crist Kathleen A. Gaskin Leonard Maas
Paul R. Ballard James C. Epolito H. Nicholas Genova Lyle W. Miller
David L. Becker Gary A. Falkenberg Lewis D. Johns David O'Leary
Robert C. Carr Joel I. Ferguson Michael L. Kasten Joseph D. Reid
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. Proposal to approve the Capitol Bancorp 2000 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
[REVERSE OF CARD]
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this Proxy will be voted
"FOR" the Proposals.
Please sign this proxy exactly as your name appears on the books of the company.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
Date , 2000
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Signature
----------------------------------------
Signature
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if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
Please indicate whether you plan to attend the Annual Meeting of Stockholders:
[ ] WILL ATTEND NUMBER OF PERSONS
--------
[ ] WILL NOT ATTEND
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