Notice of Annual Meeting
and Proxy Statement
Annual Meeting to Be Held
1 Main Street North
Minot, ND 58703
(701) 837-9600
[
], 2014
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to be held at the Sleep Inn, 2400 10th Street SW, Minot, North Dakota, commencing at 9:00 a.m. local time, on [
], [
], 2014.
The Secretary’s Notice of Annual Meeting and the Proxy Statement, which follow, describe the matters to come before the Meeting. During the Meeting we will also review the activities of the past year and items of general interest about the Company.
We hope that you will be able to attend the Meeting in person and we look forward to seeing you. Please mark, date and sign the enclosed Proxy and return it in the accompanying envelope as quickly as possible, even if you plan to attend the Meeting. You may revoke the Proxy and vote in person at that time if you so desire.
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Sincerely,
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/s/
John Carlson
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John Carlson
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President & Chief Executive Officer
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Page
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Notice of Annual Meeting
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1
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General Information
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2
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Question and Answer Summary: About the Meeting
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3
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Proposal No. 1 – Election of Directors
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5
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Certain Relationships and Related Transactions
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7
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Corporate Governance
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7
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Executive Compensation
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8
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Outstanding Equity Awards at Fiscal Year-end
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9
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Fees Billed for Services Rendered by Independent Accountant
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9
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Policy on Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services of Independent Auditors
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10
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Director Compensation
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10
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Executive Officers
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11
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Section 16(A) Beneficial Ownership Reporting Compliance
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11
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Security Ownership of Beneficial Owners and Management
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11
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Proposal No. 2 – Ratification of Selection of Independent Auditors
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12
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Proposal No. 3 - Approve Abandonment of Conversion From a
Corporation to a Limited Liability Company
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13
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Proposal No. 4 - Approve Advisory Vote on Compensation of Executive Officers
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14
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Proposal No. 5 - Approve Frequency of Shareholder Advisory
Vote on Compensation
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15
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Other Matters
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16
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Deadline for Submission of Shareholder Proposals
For Next Annual Meeting
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16
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Voting Trustees and Their Nominees
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16
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Notice of 2014 Annual Meeting of Shareholders
To be held [
], 2014
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Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to Be Held [ ], 2014
The Notice of 2014 Annual Meeting, Proxy Statement and 2013 Annual Report
to Shareholders are available at
www.capitalfinancialholdings.com/proxy
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Notice is Hereby Given
that the Annual Meeting of Shareholders (the “Meeting”) of Capital Financial Holdings, Inc., (the “
Company
”), a North Dakota corporation, will be held on [
], 2014, at 9:00 a.m., local time, at the Sleep Inn, 2400 10th Street SW, Minot, North Dakota, for the following purposes:
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1.
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To elect the Board of Directors of the Company.
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2.
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To ratify the selection of Hein & Associates, LLP as the Company’s independent auditors for the fiscal year ending December 31, 2014.
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3.
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To
approve abandoning the plan to convert from a corporation to a limited liability company.
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4.
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To approve the compensation of the named executive officers.
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5.
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To approve on frequency of advisory vote on executive compensation.
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6.
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To transact such other business as may properly come before the Meeting and at any postponements or adjournments thereof.
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Only shareholders of record at the close of business on [
], 2014, are entitled to notice of and to vote at the Meeting or at any postponements or adjournments thereof.
You are cordially invited and urged to attend the Meeting. All shareholders, whether or not they expect to attend the Meeting in person, are requested to complete, date and sign the enclosed form of Proxy and return it promptly in the postage-paid, return-addressed envelope provided for that purpose. Shareholders who attend the Meeting may revoke a prior Proxy and vote in person as set forth in the Proxy Statement.
The Board of Directors of the Company is soliciting the enclosed Proxy. The Board of Directors recommends that you vote in favor of the proposed items. Your vote is important.
By Order of the Board of Directors
/s/ ________________________________
Elizabeth A. Redding, Secretary
Minot, North Dakota
Dated: [
], 2014
Your Proxy and return envelope are enclosed with this notice. In order to assure a quorum for the Transaction of Business at the Meeting, each Shareholder is asked to sign and return his or her Proxy in the enclosed envelope. Every Proxy is important, whether you own one or many shares.
Please do it today
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1 Main Street North
Minot, ND 58703
(701) 837-9600
Proxy Statement
Annual Meeting of Shareholders
To be held [
], 2014
General Information
The enclosed Proxy is being solicited by the Board of Directors (“Board”) of Capital Financial Holdings, Inc. (the “Company”), a North Dakota corporation, for use in connection with the Annual Meeting of Shareholders on [
], 2014, at 9:00 a.m. local time (the “Meeting”) at the Sleep Inn, 2400 10th Street SW, Minot, North Dakota, and at any postponement or adjournment thereof. Only shareholders of record as of the close of business on [], 2014 (the “Record Date”) will be entitled to vote at the Meeting or any postponement or adjournment thereof. When the accompanying Proxy (each, a “
Proxy
”) is properly executed and returned, the shares it represents will be voted at the Meeting in the manner specified.
Any Proxy may be revoked at any time before it is voted by written notice mailed or delivered to the secretary, by a receipt of a Proxy properly signed and dated subsequent to an earlier Proxy and by revocation of a written Proxy by request in person at the annual meeting of shareholders. If not so revoked, the shares represented by the Proxy will be voted in accordance with the instructions on the Proxy form.
The address of the principal executive office of the Company is 1 Main Street North, Minot, North Dakota 58703. This Proxy Statement and the Board’s form of Proxy are being mailed to shareholders on or about [
], 2014. Concurrent with the mailing of this Statement, the Company is furnishing to shareholders its Annual Report for its fiscal year ended December 31, 2013.
The Company is bearing all costs of soliciting Proxies and expressly reserves the right to solicit Proxies otherwise than by mail. Telephone, e-mail, facsimile or other personal solicitations of certain shareholders and brokers may follow the solicitation of Proxies by mail by one or more of the directors, by officers or by employees of the Company. The Company may make requests to trusts, banks and brokers or other similar agents or fiduciaries for the voting instructions of beneficial owners and reimburse the expenses incurred by such agents or fiduciaries in obtaining such instructions. As of the date of this mailing, however, the Company has not made any contracts or arrangements for such solicitations; hence, it cannot identify any parties or estimate the cost of such solicitation.
As of [ ], 2014, the Company had outstanding 1,241 common shares, $0.0001 par value, with each share being entitled to one vote, except for the election of directors, when shareholders are entitled to cumulate their votes. Representation of a majority of the Company’s shares outstanding on such date, either in person or by Proxy, constitutes a quorum for the Meeting. When a quorum is present, the vote by the holders of a majority of the shares present and entitled to vote at the Meeting shall decide the proposals to be voted upon at the Meeting, A shareholder voting through a Proxy who abstains with respect to a certain proposal is considered to be present and entitled to vote on such proposal at the Meeting and is, in effect, casting a negative vote, but a shareholder (including a broker) who does not give authority to a Proxy to vote or withholds authority to vote on a certain proposal shall not be considered present and entitled to vote on such proposal.
Because many of the Company’s shareholders may be unable to attend the Meeting in person, our Board solicits Proxies by mail to give each shareholder an opportunity to vote on all matters presented at the Meeting. Shareholders are urged to:
(1) read this Proxy Statement carefully;
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(2)
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specify their choice in each matter by marking the appropriate box on the enclosed Proxy; and
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(3)
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sign, date and return the Proxy by mail in the postage-paid, return-addressed envelope provided for that purpose.
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Question and Answer Summary: About the Meeting
What is being voted on at the Meeting?
The Company’s Board is asking shareholders to consider five items at this Meeting:
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To elect three directors to the Company’s Board of Directors;
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To ratify the selection of Hein & Associates, LLP, as the Company’s independent auditors for the fiscal year ending December 31, 2014;
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To approve abandoning the Company’s plan to convert from a corporation to a limited liability company;
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To approve on an advisory basis the compensation of named executive officers; and
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To approve the frequency of shareholder advisory voting on executive compensation.
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Who can vote at the Meeting?
Our Board has set [ ], 2014, as the Record Date for the Meeting. Only persons holding shares of record at the close of business on the Record Date will be entitled to receive notice of and to vote at the Meeting. Each share will be entitled to one vote on each matter properly submitted for vote to our shareholders at the Meeting. On the Record Date, there were approximately 1,241 common shares outstanding held by approximately 500 shareholders of record. Therefore, there are a total of approximately 1,241 votes that will be entitled to be cast at the Meeting.
What constitutes a quorum for the Meeting?
A quorum for the Meeting is based on the number of votes that can be cast rather than the number of actual shares that are represented, because each share has one vote per share. To have a quorum, we need more than 50% of the votes entitled to be cast to be present, in person or by proxy, including votes as to which authority to vote on any proposal is withheld, shares abstaining as to any proposal and broker non-votes (where a broker submits a Proxy but does not have authority to vote a customer’s shares on one or more matters) on any proposal, all of which will be considered present at the Meeting for purposes of establishing a quorum for the transaction of business at the Meeting. Each vote will be tabulated separately.
How do I vote?
If you complete and properly sign the accompanying Proxy form and return it to us, it will be voted as you direct, unless you later revoke the Proxy. Unless instructions to the contrary are marked or if no instructions are specified, shares represented by a Proxy will be voted
for
the proposals set forth on the Proxy, and in the discretion of the persons named as proxies, on such other matters as may properly come before the Meeting. If you are a registered shareholder, that is, if you hold your shares in certificate form, and you attend the Meeting, you may deliver your completed Proxy form in person. If you hold your shares in “street name,” that is, if you hold your shares through a broker or other nominee, and you wish to vote in person at the Meeting, you will need to obtain a Proxy form from the institution that holds your shares.
Can I change my vote after I return my Proxy form?
Yes. Even after you have submitted your Proxy, you may change your vote at any time before the Proxy is exercised by filing with our Secretary, at the address at the top of page 1, either a written notice of revocation or a duly executed Proxy bearing a later date or you may vote in person at the Meeting. The powers of the Proxy holders will be suspended if you attend the Meeting in person and so request. However, attendance at the Meeting will not by itself revoke a previously granted Proxy.
Any written notice of revocation sent to us must include the shareholder’s name and must be received prior to the Meeting to be effective.
What vote is required to approve each item?
Proposal No. l. Election of Directors
. The election of each director nominee requires the affirmative vote of a plurality of the votes cast, if a quorum is present, in the election of directors. Shareholders are entitled to cumulate votes with respect to the election of directors only in accordance with the procedure described under Proposal No. l herein.
Proposal No. 2. Ratification of Auditors
. An affirmative vote of a majority of the votes cast at the Meeting, if a quorum is present, is required for ratification of the selection of Hein & Associates LLP, as independent auditors for the fiscal year ending December 31, 2014.
Proposal No. 3. Abandonment of Plan to Convert to an LLC.
An affirmative vote of a majority of the votes cast at the Meeting, if a quorum is present, is required for approval to abandon the Company’s plan to convert the Company from a corporation to a limited liability company.
Proposal No. 4 – Approve on an Advisory Basis the Compensation of Named Executive Officers.
An affirmative vote of a majority of the votes cast at the Meeting, if a quorum is present, is required for non-binding advisory approval of the executive compensation of named executive officers.
Proposal No. 5 – Frequency of Advisory Vote on Executive Compensation.
An affirmative vote of a majority of the votes cast at the Meeting, if a quorum is present, is required for approval to set the frequency of shareholder advisory vote on executive compensation.
While affirmative abstentions are counted in tabulations of the votes cast on proposals presented to shareholders, with respect to Proposal Nos. 2, 3, 4 and 5, broker non-votes are not counted for purposes of determining whether the proposal has been approved. Therefore, for those matters affirmative abstentions will have the same effect as a vote against the proposal.
Votes cast by Proxy will be tabulated by Issuer Direct Corporation, an independent proxy service. The Company has appointed independent, impartial election inspectors for the Meeting who will count votes cast by Proxy or in person at the Meeting.
Proposal No. 1
Election of Directors
At the Meeting to be held on [ ], 2014, and at any and all postponements or adjournments thereof, it is intended that the Company’s shares represented by properly executed Proxies that are enclosed herewith will be voted to elect the director nominees, unless authority so to vote is withheld. Each nominee is currently a member of the Board of the Company and all of the nominees have indicated a willingness to serve as a director, if elected. If elected, each nominee will serve until the next annual meeting of shareholders or until the earlier of removal, resignation, death or disqualification. The Board has no reason to believe that any of the director nominees will be unable to serve as directors or become unavailable for any reason. If, at the time of the Meeting, any of the director nominees shall become unavailable for any reason, the persons entitled to vote the Proxy will vote, as such persons shall determine in his or her discretion, for such substituted nominee or nominees, if any, nominated by the Board. The affirmative vote of a plurality of the votes present or represented to vote at the Meeting is necessary to elect each director nominee. Shareholders of the Company will have an opportunity on their Proxy to vote in favor of one or more director nominees while withholding authority to vote for one or more director nominees.
The directors have voted to nominate three directors for election to hold office for a one-year term until the next Annual Meeting of Shareholders or until their successors are elected and qualified. Proxies solicited by the Board will, unless otherwise directed, be voted to elect the three nominees named below.
Following is certain information regarding the nominees for director:
Name
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Age
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Term Of Office With The Company
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Positions And Offices With The Company
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John Carlson
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50
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As CEO, 02-09-2011 to Present
As Director, 12-12-2013 to Present
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Director, CEO
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Gordon Dihle
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59
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11-07-2013 to Present
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Director
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Elizabeth Redding
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27
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As CFO and Secretary, 03-26-2012 to Present
As Director, 12-12-2013 to Present
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Director, CFO, Secretary
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Cumulative voting is permitted in the election of directors in accordance with the following procedure:
Each shareholder entitled to vote for directors has the right to cumulate those votes in the election of directors by giving written notice of such intent to any officer of the Company before the Meeting or the presiding officer at the Meeting at any time before the election of directors, in which case:
1. The presiding officer at the Meeting shall announce, before the election of directors, that shareholders may cumulate their votes; and
2. Each shareholder shall cumulate those votes either by casting for one candidate the number of votes equal to the number of directors to be elected multiplied by the number of votes represented by the shares entitled to vote, or by distributing all of those votes on the same principle among any number of candidates.
Therefore, unless the above-described procedure is implemented, the holders of a majority of the Company’s shares could elect all of the directors. It is expected that the Proxies received by the directors’ nominees will be voted, except to the extent that authority is withheld on any Proxy as to all of one or more individuals, to elect as directors the following nominees, whose principal occupations during the past five years, directorships and certain other affiliations and information are set forth below:
John R. Carlson
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Mr. Carlson attended Montana State University in Bozeman, Montana, pursuing education in Physics and Chemical Engineering. He has passed several securities qualification examinations including the General Securities Representative, General Securities Principal, Uniform Securities Agent State Law, Registered Investment Advisor, Municipal Securities Principal, and insurance licenses for Life Insurance, Variable Life Insurance, Annuities and Variable Annuities, and Accident and Health Insurance. From September of 1998 to July of 2002, Mr. Carlson worked as a Financial Advisor with a national financial services firm. Mr. Carlson specialized in comprehensive financial planning relating to retirement, education, and risk management planning. Mr. Carlson has been Chief Executive Officer and President of the Company since February 9, 2011, and a Director since December 12, 2013. Since July of 2002, Mr. Carlson has served Capital Financial Services, Inc., a subsidiary of the Company, and is currently that firm’s Chief Compliance Officer.
Gordon Dihle
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Mr. Dihle received a B.S. in Accounting and Business Administration, Summa Cum Laude (1976) at Dickinson State University, Dickinson, ND and earned a J.D. with distinction at the University of North Dakota (1980) in Grand Forks, ND. Mr. Dihle is a CPA licensed with the state of North Dakota, a member of the AICPA and an attorney licensed with the state of Colorado. Mr. Dihle has been employed as an attorney and has been principal of Corporate Legal, LLC in Centennial Colorado since 1996 and was concurrently employed at Spencer Edwards, Inc., a securities brokerage firm from 2002 until November 2013 in various capacities as a general and financial principal. Mr. Dihle has been the Chairman of Board of Directors of the Company since November 7, 2013, and had previously acted as general counsel for the Company from September 2009 until February 2011. Mr. Dihle has been a Director of the Company since November 7, 2013.
Elizabeth A. Redding
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In 2010, Ms. Redding received a B.S. Degree in Business Management from Minot State University, Minot, North Dakota. Ms. Redding served as the general manager of Spicy Pie, a restaurant located in Fargo, North Dakota, from 2009 to 2010. From 2010 to 2011, Ms. Redding served as an administrative assistant and as a commission/accounting specialist at Capital Financial Services, Inc., a broker-dealer located in Minot, North Dakota and a subsidiary of the Company. From 2011 to 2012, Ms. Redding served as a loan officer for Northern Tier Federal Credit Union located in Velva, North Dakota. From 2012 to March 2014, Ms. Redding served as Treasurer of the Velva Association of Commerce, a local organization located in Velva, North Dakota. From 2012 to present, Ms. Redding serves on the Board of the Velva Association of Commerce. Ms. Redding has been employed by the Company since March 26, 2012, and has been its Chief Financial Officer and Secretary since March 26, 2012, and a Director since December 12, 2013.
Certain Relationships and Related Transactions
None of the directors are related to any other director or to any executive officer of the Company.
There were no material related person transactions during fiscal year 2013.
Corporate Governance
Attendance at Board, Committee and Annual Shareholder’s Meetings
During the fiscal year ended December 31, 2013, the Board held five regular meetings and two special meetings. All directors are expected to attend each meeting of the Board and the committees on which they serve, and are also expected to attend each annual meeting of shareholders. Each director attended at least 75% of the Board meetings, including committee meetings on which the Board member served during this period. The annual meeting was held June 19, 2013 and all board members attended. The present Board of Directors as a whole act as the Company’s Audit Committee. The Company presently does not have a Nominating Committee or a Compensation Committee and, therefore, shareholders will have to rely upon the entire Board of Directors, all of whom are not independent under Rule 10A-3 of the Securities Act of 1934, to perform these functions. Thus, there is a potential conflict in that board members who are management will participate in discussions concerning management compensation and audit issues that may affect management decisions.
Audit Committee
The Company’s Audit Committee is composed of Gordon Dihle, Elizabeth Redding and John Carlson, none of whom meet the independence requirements of the SEC with respect to audit committee membership. However, because the Company is not listed on a national securities exchange, it is exempt from the requirements of Rule 10A-3 requiring that members of the audit committee be independent. The Audit Committee oversees the external audit coverage, including the annual nomination of the independent accountants, reviews accounting policies and policy decisions, reviews the financial statements, including interim financial statements and annual financial statements, together with auditor’s opinions, inquires about the existence and substance of any significant accounting accruals, reserves or estimates made by management, meets privately with the independent accountants to discuss all pertinent matters and reports to the Board regarding its activities. The Audit Committee held four regular meetings in 2013.
The Audit Committee has adopted a formal, written charter, which was amended on March 9, 2004. The charter specifies the scope of the Audit Committee’s responsibilities and how it should carry out those responsibilities. The charter also outlines the Audit Committee’s pre-approval policies and procedures that require the Audit Committee to review and approve, in advance, fees proposed to be charged to the Company by the auditors for each audit and non-audit service. The Audit Committee Charter must be filed every three years. It was last filed in 2013; it will be filed again in 2016.
Report of Audit Committee
The Audit Committee met to review the audited financials for the fiscal year ended December 31, 2013, with members of management and the independent accountants. The independent accountants discussed with the Audit Committee new accounting policies, management’s judgments and use of accounting estimates in the preparation of the financial statements and significant audit adjustments. Annually, the independence of the auditors is discussed and the auditors provide information regarding their independence required by Independence Standards Board No. 1, as may be modified or supplemented. Based upon a thorough discussion of the aforementioned, the Audit Committee has recommended that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year 2013.