SOUTHWEST BANCORPORATION OF TEXAS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1997
To the Shareholders of
Southwest Bancorporation of Texas, Inc.
The Annual Meeting of Shareholders (the "Annual Meeting") of Southwest
Bancorporation of Texas, Inc. (the "Company") will be held at the Company's main
offices, 4400 Post Oak Parkway, Houston, Texas, on Tuesday, May 20, 1997, at
5:00 p.m., Houston time, for the following purposes:
1. To elect three Directors of Class I of the Board of Directors to
hold office until the 2000 Annual Meeting of Shareholders and until their
respective successors have been elected and qualified, or until their
earlier resignation or removal;
2. To ratify the selection of Coopers & Lybrand L.L.P. as the
Company's independent auditors for the year ending December 31, 1997; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment hereof.
The close of business on Monday, April 21, 1997, has been fixed as the
record date for the determination of shareholders entitled to notice of and to
vote at the Annual Meeting; and only shareholders of record at such time will be
entitled to notice and to vote. In compliance with Article 2.27 of the Texas
Business Corporation Act, a list of shareholders entitled to vote at the Annual
Meeting will be available for inspection at the offices of the Company by any
shareholder during usual business hours for a period of ten days prior to the
Annual Meeting. The list of shareholders will also be available for inspection
at the Annual Meeting until the adjournment thereof.
By Order of the Board of Directors
David C. Farries
EXECUTIVE VICE PRESIDENT,
TREASURER AND SECRETARY
Dated: April 24, 1997
Houston, Texas
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU MAY OWN. THE
COMPANY'S MANAGEMENT SINCERELY DESIRES YOUR PRESENCE AT THE ANNUAL MEETING.
HOWEVER, SO THAT WE MAY BE SURE THAT YOUR VOTE WILL BE INCLUDED, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE
IT IS VOTED.
<PAGE>
SOUTHWEST BANCORPORATION OF TEXAS, INC.
4400 POST OAK PARKWAY
HOUSTON, TEXAS 77027
(713) 235-8800
------------------------
PROXY STATEMENT
------------------------
This proxy statement is furnished to the shareholders of Southwest
Bancorporation of Texas, Inc., a Texas corporation (the "Company"), for
solicitation of proxies on behalf of the Board of Directors of the Company for
use at the 1997 Annual Meeting of Shareholders (the "Annual Meeting") to be held
May 20, 1997, and at any and all adjournments thereof. The purpose of the
meeting and the matters to be acted upon are set forth herein and in the
accompanying Notice of Annual Meeting of Shareholders.
Shares represented at the Annual Meeting by an executed and unrevoked proxy
in the form enclosed, will be voted in accordance with the instructions
contained therein. If no instructions are given on an executed and returned form
of proxy, the proxies intend to vote the shares represented thereby in favor of
each of the proposals to be presented to and voted upon by the shareholders as
set forth herein, and in accordance with their best judgment on any other matter
which may properly come before the Annual Meeting.
Any proxy given by a shareholder may be revoked by such shareholder at any
time before it is exercised by submitting to the Secretary of the Company a duly
executed proxy bearing a later date, delivering to the Secretary of the Company
a written notice of revocation, or attending the Annual Meeting and voting in
person.
The cost of this solicitation of proxies is being borne by the Company.
Solicitations will be made only by the use of the mail, except that, if deemed
desirable, officers and regular employees of the Company may solicit proxies by
telephone, telegraph or personal calls, without being paid additional
compensation for such services. Brokerage houses, custodians, nominees and
fiduciaries will be requested to forward the proxy soliciting material to the
beneficial owners of the Common Stock, par value $1.00 per share, of the Company
(the "Common Stock") held of record by such persons, and the Company will
reimburse them for their reasonable expenses incurred in this connection.
The Company's Annual Report to Shareholders, including financial
statements, for the year ended December 31, 1996, accompanies but does not
constitute part of this proxy statement.
The mailing to shareholders of this proxy statement and the enclosed proxy
commenced on or about April 24, 1997.
VOTING SHARES AND VOTING RIGHTS
Only holders of record of Common Stock at the close of business on April
21, 1997, are entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof. At that time, there were outstanding
9,390,933 shares of Common Stock, which is the only outstanding class of voting
securities of the Company. A majority of the outstanding shares of Common Stock
must be represented at the Annual Meeting in person or by proxy in order to
constitute a quorum for the transaction of business. Each holder of Common Stock
shall have one vote for each share of Common Stock registered, on the record
date, in such holder's name on the books of the Company.
A plurality of the votes cast in person or by proxy by the holders of
Common Stock is required to elect a director. The three nominees receiving the
highest number of votes cast by the holders of the Common Stock will be elected
as directors. There will be no cumulative voting in the election of directors.
Abstentions and broker non-votes will have no effect on the outcome of the
election of directors, assuming a quorum is present or represented by proxy at
the Annual Meeting. With respect to the
1
<PAGE>
ratification of the selection of independent auditors and any other matters,
abstentions will have the same legal effect as a vote against such matter, and
broker non-votes will have no effect on such matters. A broker non-vote occurs
if a broker or other nominee of shares does not have discretionary authority and
has not received voting instructions with respect to a particular matter.
ITEM 1.
ELECTION OF DIRECTORS
Three directors are to be elected at the Annual Meeting. John B. Brock III,
J. David Heaney and Andres Palandjoglou have been nominated to fill the three
expiring Class I positions on the Board of Directors, to hold office until the
2000 Annual Meeting of Shareholders and until their respective successors have
been duly elected and qualified or until their earlier resignation or removal.
The Class II directors (Ernest H. Cockrell, Paul B. Murphy, Jr. and Michael T.
Willis) presently hold office until the 1998 Annual Meeting of Shareholders and
until their respective successors have been duly elected and qualified or until
their earlier resignation or removal. The Class III directors (John W. Johnson,
Walter E. Johnson and Wilhelmina R. Morian) presently hold office until the 1999
Annual Meeting of Shareholders and until their respective successors have been
duly elected and qualified or until their earlier resignation or removal.
Although the Board of Directors knows of no reason why any of these
nominees might be unable or refuse to accept nomination or election, if such
situation arises, the persons named in the proxy have the right to use their
discretion to vote for a substitute nominee or nominees designated by the Board
of Directors. All of the nominees have consented to being named herein and to
serve if elected.
The names and ages of the Company's executive officers and directors,
including the three nominees for election to the Class I positions on the Board
of Directors, the principal occupation or employment of each of them during the
past five years and at present, the name and principal business of the
corporation or other organization, if any, in which such occupation or
employment is or was carried on, directorships of other public companies or
investment companies held by them, and the period during which the directors
have served in that capacity with the Company are set forth below. All of the
directors of the Company are also directors of the Company's subsidiary,
Southwest Bank of Texas National Association (the "Bank") except for Mr.
Palandjoglou, and all of the directors live in Houston, Texas. Each of the
directors and executive officers was elected to the position with the Company
shown below in 1996, with the exception of Messrs. Argue and Heaney, who were
elected in 1997.
NAME POSITION AGE
- ---------------------------------------------------------------------- ----
John B. Brock III*............... Director 64
Ernest H. Cockrell............... Director 51
J. David Heaney*................. Director 48
John W. Johnson.................. Director and Chairman of the 51
Executive Committee of the Bank's
Board of Directors
Walter E. Johnson................ Chairman of the Board and Chief 61
Executive Officer
Wilhelmina R. Morian............. Director 50
Paul B. Murphy, Jr............... Director and President 37
Andres Palandjoglou*............. Director 49
Michael T. Willis................ Director 52
Joseph H. Argue.................. Executive Vice President 48
David C. Farries................. Executive Vice President, Treasurer 50
and Secretary of the Company and
Executive Vice President and Chief
Financial Officer of the Bank
Yale Smith....................... Executive Vice President 60
Sharon K. Sokol.................. Executive Vice President 46
Steve D. Stephens................ Executive Vice President 37
R. John McWhorter................ Vice President and Controller 32
- ------------
* Nominee for election at Annual Meeting.
2
<PAGE>
JOHN B. BROCK III. Mr. Brock became a director of the Bank in 1991. He has
been the Chairman of the Board and Chief Executive Officer of United Meridian
Corp. ("UMC") since May 1995 and a director of UMC since November 1989. Mr.
Brock served as the President of UMC from May 1996 to October 1996, served as
the President and Chief Executive Officer of UMC from February 1992 to May 1995
and served as the President and Chief Operating Officer of UMC from November
1989 to February 1992. Mr. Brock is a director and member of the Executive
Committee of the Texas Midcontinent Oil and Gas Association, a director of the
National Midcontinent Oil and Gas Association, a director of the American
Petroleum Institute, a director of St. Luke's Episcopal Hospital and a director
of St. Luke's Episcopal Health System.
ERNEST H. COCKRELL. Mr. Cockrell became a director of the Bank in 1982. In
1996 he became Chairman of Cockrell Oil Corporation, a company involved in oil
and gas exploration and production, prior to which he had been President of such
company for more than five years. Mr. Cockrell is also involved in ranching,
farming and investments. He is a Director of Pennzoil Company, Independent
Petroleum Association of America, and the Cockrell Foundation.
J. DAVID HEANEY. Mr. Heaney became a director of the Bank in 1990. He is a
co-founder of Heaney Rosenthal Inc., a private investment company and serves as
its Chairman. In 1986, Mr. Heaney was one of the founders of Sterling Chemicals,
Inc., which later became a public company traded on the New York Stock Exchange.
During his eight years with Sterling, Mr. Heaney served as Sterling's
Administrative Vice President, and later as Chief Financial Officer. Prior to
joining Sterling in 1986, Mr. Heaney was a partner in the Houston law firm of
Bracewell & Patterson, specializing in business transactions. Mr. Heaney, holds
J.D. and B.B.A. degrees from the University of Texas and currently serves as a
trustee of The Memorial Healthcare System.
JOHN W. JOHNSON. Mr. Johnson became a director and Chairman of the Board
of the Bank in 1982 and served in that capacity until 1996, when he was named
Chairman of the Bank's Executive Committee. For more than five years, he has
been Chairman and President of Permian Mud Service, Inc., an oil field service
company with several active subsidiaries including Champion Technologies, Inc.,
Densimix, Inc., and Johnson & Lindley, Inc. He is a Director of Weatherford
Enterra, Inc. and is Chairman of the Board of Trustees of St. John's School. Mr.
Johnson received a Bachelor of Engineering degree from Vanderbilt University in
1968. Mr. Johnson is not related to Walter E. Johnson.
WALTER E. JOHNSON. Mr. Johnson joined the Bank in July 1989 as President,
Chief Executive Officer and a director. From October 1972 to February 1988, he
served as President of Allied Bank of Texas, and upon the purchase of that bank
by First Interstate Bancorp, he served as President Central Office of First
Interstate Bank of Texas, N.A. from March 1988 to June 1989. Mr. Johnson served
on the Trust Committee, Profit Sharing Investment Committee, and Board of
Directors of Allied Bank of Texas. He also served as a Director of the holding
company, Allied Bancshares, Inc., which owned 52 banks and reached $9 billion in
assets. Mr. Johnson was the Senior Lending Officer of Allied Bank of Texas and
spent the majority of his time directing the lending staff and business
development. Prior to joining Allied Bank of Texas, he accumulated an additional
12 years of banking experience, primarily with the international department of
Bank of the Southwest. Mr. Johnson is a former member of the Board of Directors
of the Houston Branch of the Dallas Federal Reserve Bank. He is a board member
of the Boy Scouts of America, Junior Achievement and the American Free
Enterprise Society. He is currently active in, and has been chairman of,
numerous major fund raising campaigns for various Houston charities. Mr. Johnson
is a graduate of Texas Christian University.
WILHELMINA R. MORIAN. Ms. Morian became a director of the Bank in 1982.
Since 1980 she has been President of Westview Development, Inc. (real estate
development) and Cockspur, Inc. and a partner in various real estate and oil and
gas ventures. She is Chairman of the Board of the Cullen Trust for Healthcare,
Past Chair, Board of Regents of the University of Houston Systems and serves on
the Board of the Houston Zoological Society, The Neuhaus Education Center, The
Greater Houston Partnership and The Museum of Fine Arts--Houston.
3
<PAGE>
PAUL B. MURPHY, JR. Mr. Murphy joined the Bank in January 1990 as an
Executive Vice President, was elected a director in 1994 and became President in
1996. He began his banking career with Allied Bank of Texas in 1981, where he
first became associated with Walter Johnson, Yale Smith, Sharon Sokol and
several other Bank personnel. Mr. Murphy received his B.S. degree from
Mississippi State University and his M.B.A. from the University of Texas at
Austin. He is involved in numerous civic and community organizations including:
Young Presidents Organization, Past Chairman of Houston Arts Fund, Trustee of
Children's Museum of Houston and the Advisory Board of University of Texas
Health Science Center at Houston.
ANDRES PALANDJOGLOU. Mr. Palandjoglou was elected a director of the
Company upon its formation in 1996, and has been an advisory director of the
Bank since 1990. For more than five years, he has been President of Rio Largo,
Inc., a company involved in real estate investments and, as a partner in
Memorial Builders, in the development of residential subdivisions and the
construction of custom homes. Also, Mr. Palandjoglou is involved in textile
manufacturing and ranching in Argentina. He is a member of the Greater Houston
Builders Association.
MICHAEL T. WILLIS. Mr. Willis became a director of the Bank in 1988. He
has over 20 years of experience in the personnel services and temporary help
industry. In 1976 he founded Talent Tree Personnel and guided that company
through more than 15 years of rapid growth with sales growing to an annualized
rate of $300 million per year. Resigning from Talent Tree in March 1993, Mr.
Willis founded COREStaff, Inc. in July 1993 where he is Chairman of the Board,
President and CEO. He is also on the Board of Serv-Tech, Inc.
JOSEPH H. ARGUE. Mr. Argue joined the Company and the Bank in April of
1997 as Executive Vice President of the Company and Executive Vice President of
the Bank's lending division at the Five Post Oak office, with 24 years of
banking and lending experience at Wells Fargo Bank (Texas), N.A., First
Interstate Bank of Texas, N.A. and Allied Bank of Texas. He has both bachelor's
and master's degrees in business administration from Stephen F. Austin State
University.
DAVID C. FARRIES. Mr. Farries joined the Bank in 1993 as Senior Vice
President and Treasurer with 19 years of banking and investment experience with
First City National Bank of Houston and 3 years of public accounting experience
with Price Waterhouse & Co. He was promoted to Chief Financial Officer of the
Bank in 1994 and Executive Vice President of the Company in 1996. Mr. Farries
has both bachelor's and master's degrees in business administration from the
University of Texas. He is a CPA and has his NASD Series 24 (Securities
Principal) and Series 7 (Securities Representative) licenses.
SHARON K. SOKOL. Ms. Sokol joined the Bank in 1990. She has over 26 years
of banking experience, including over eight years of branch administration and
retail services at Indiana National Bank. After moving to Texas in 1978, she
successfully established several new products and departments at Western Bank,
including a Corporate Cash Management Division. She moved on to Texas Commerce
Bank where she was Vice President in Cash Management Marketing. In 1987, she
joined First Interstate Bank of Texas as Vice President and Manager of Cash
Management. Ms. Sokol joined the Bank in February 1990 to establish its cash
management services. In October 1990, she was appointed Chief Operations
Officer, and in 1992 she was appointed Executive Vice President. Ms. Sokol
serves as the Chairperson of the Board of Directors for the Southwest Automated
Clearing House and also serves on the Board of Directors of the Clearing House
Association of the Southwest. She also serves on the Board of Trustees for the
Houston Heritage Society and the Juvenile Diabetes Foundation.
YALE SMITH. Mr. Smith has over 30 years of banking experience in Houston.
He has focused his career on middle market lending since his days at First City
National Bank where he managed the Metropolitan Division prior to joining Allied
Bank of Texas in 1982. He joined the Bank in February 1990 as an Executive Vice
President and heads the Bank's downtown branch offices. Mr. Smith is very active
in the Houston community having served as past Chairman of the Board of the
Salvation Army and currently serving as Director of the MIT Forum of Texas and
as an Administrative Board Member of St. Luke's United Methodist Church.
4
<PAGE>
STEVE D. STEPHENS. Mr. Stephens has over 15 years of commercial lending
experience, and is currently in charge of the Bank's Northwest Crossing office,
and the Memorial City office. Prior to joining the Bank as an Executive Vice
President in 1990, he was Senior Vice President and Manager of Commercial
Lending at Texas Commerce Bank Reagan. Mr. Stephens is active in a variety of
community organizations including being past president of the Kiwanis Club of
Houston, a Board member of the Children's Fund and active in the Muscular
Dystrophy Association. He graduated from the University of Houston with a B.B.A.
in accounting in 1980.
R. JOHN MCWHORTER. Mr. McWhorter has been Vice President and Controller of
the Bank since 1990, prior to which he had been employed by Coopers & Lybrand
L.L.P. He graduated from the University of Texas with a B.B.A. in accounting in
1987 and is a certified public accountant.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has established audit and compensation committees.
The Audit Committee currently consists of John B. Brock III, J. David Heaney,
Andres Palandjoglou and Wilhelmina R. Morian, none of whom is an employee of the
Company. The Audit Committee reviews the general scope of the audit conducted by
the Company's independent auditors, the fees charged therefor and matters
relating to the Company's internal control systems. In performing its functions,
the Audit Committee meets separately with representatives of the Company's
independent auditors and with representatives of senior management. The Audit
Committee held three meetings during 1996.
The Compensation Committee currently consists of John B. Brock III, John W.
Johnson and Michael T. Willis, none of whom is an employee of the Company. The
Compensation Committee administers the Company's stock option plans and makes
recommendations to the Board of Directors as to option grants to Company
employees under such plans. In addition, the Compensation Committee is
responsible for making recommendations to the Board of Directors with respect to
the compensation of the Company's executive officers and is responsible for the
establishment of policies dealing with various compensation and employee benefit
matters for the Company. The Compensation Committee held two meetings during
1996.
During the year ended December 31, 1996, the Board of Directors held 12
meetings. In 1996, each incumbent director attended at least 75% of the
aggregate of the total number of meetings of the Board of Directors and the
total number of meetings held by all committees on which he served (in each case
held during the periods that he served), except for Michael T. Willis.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Prior to November 18, 1996, the Compensation Committee of the Bank's Board
of Directors consisted of Walter E. Johnson, John W. Johnson and Michael T.
Willis. As a member of this Committee, Walter E. Johnson participated in the
determination of Committee recommendations to the Executive Committee of the
Bank's Board of Directors as to compensation for executive officers, including
himself. Final determinations of such compensation were made by such Executive
Committee. On November 18, 1996, the Company's Board of Directors established
the Compensation Committee consisting of John B. Brock III, John W. Johnson and
Michael T. Willis, described above, and the former Compensation Committee was
terminated.
DIRECTOR COMPENSATION
In an effort to attract and retain qualified directors, the Bank's Board of
Directors approved a methodology of awarding stock options to directors under
the Company's employee stock option plans, effective beginning in 1994 (the
"Directors' Plan"), which methodology was assumed and continued by the Company
upon the formation thereof in 1996. Pursuant to the Directors' Plan, directors
are awarded options for attendance and participation at monthly directors'
meetings and, additionally, for introducing legitimate business prospects to the
Company. Options to purchase a maximum of 42,250 shares of Common Stock may be
granted under the Directors' Plan during a calendar year with the exercise price
approximating the fair market value of the stock at December 31 of such year.
Directors' options accumulate throughout the year, are issued during the
following year and are considered fully vested upon issuance. Options for 18,050
5
<PAGE>
shares were granted for 1995 with an exercise price of $8.80 per share, and
options for 19,400 shares were granted for the 1996 calendar year with an
exercise price of $16.50 per share.
Directors of the Company do not receive any cash compensation for attending
Company Board meetings; however, John W. Johnson receives $25,000 per year for
serving as Chairman of the Executive Committee of the Bank and for serving on
the Bank's Management Committee. Directors of the Bank receive a fee of $500 for
each meeting of the Bank's Board of Directors attended and Directors of the Bank
and the Company receive $200 for each Board Committee meeting attended.
Directors of the Bank who are also employees of the Bank do not receive fees for
attending Board Committee meetings.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF THE THREE NOMINEES FOR DIRECTOR NAMED HEREIN.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1997, by (i) each
director, (ii) each of the Named Executives (as defined under "Executive
Compensation") and (iii) all directors and executive officers as a group. Unless
otherwise indicated, each person has sole voting and dispositive power over the
shares indicated as owned by such person. No person is known by the Company to
own beneficially 5% or more of the outstanding shares of Common Stock.
PERCENTAGE
NUMBER OF BENEFICIALLY
SHARES OWNED
----------- ------------
John B. Brock III.................... 53,818(1) * %
Ernest H. Cockrell................... 132,812(2) 1.4
J. David Heaney...................... 102,466(3) 1.1
John W. Johnson...................... 207,202(4) 2.2
Walter E. Johnson.................... 222,400(5) 2.4
Wilhelmina R. Morian................. 227,935(6) 2.4
Paul B. Murphy, Jr................... 38,707(7) *
Andres Palandjogou................... 168,285(8) 1.8
Yale Smith........................... 36,805(9) *
Sharon K. Sokol...................... 21,165(10) *
Steve D. Stephens.................... 24,330(9) *
Michael T. Willis.................... 140,770(11) 1.5
Directors and executive officers as a
group.............................. 1,412,987(12) 15.2
- ------------
* Does not exceed 1.0%.
(1) Includes 2,550 shares which may be acquired within 60 days pursuant to
outstanding stock options.
(2) Includes 17,500 shares held in trust for the benefit of Ernest H. Cockrell
and 2,450 shares which may be acquired within 60 days pursuant to
outstanding stock options.
(3) Includes 31,160 shares owned by Mr. Heaney's wife, 31,844 shares held in
trust for the benefit of his two children and 3,075 shares which may be
acquired within 60 days pursuant to outstanding stock options.
(4) Includes 40,000 shares held by John W. Johnson, Trustee for the benefit of
his three children and 42,200 shares which may be acquired within 60 days
pursuant to outstanding stock options.
(5) Includes 3,750 shares held by Walter E. Johnson's wife and 102,160 shares
which may be acquired by Walter E. Johnson within 60 days pursuant to
outstanding stock options.
(6) Includes 162,635 shares held by Cullen Estate Trust for the benefit of
Wilhelmina R. Morian and 5,100 shares which may be acquired within 60 days
pursuant to outstanding stock options.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
6
<PAGE>
(7) Includes 26,725 shares which may be acquired within 60 days pursuant to
outstanding stock options.
(8) Includes 168,285 shares held by Rio Largo de Panama S.A., a family
investment corporation in which Mr. Palandjoglou owns a 25% beneficial
interest and shares voting and investment power, and 5,950 shares which may
be acquired by Mr. Palandjoglou within 60 days pursuant to outstanding
stock options.
(9) Includes 21,050 shares which may be acquired within 60 days pursuant to
outstanding stock options.
(10) Includes 17,825 shares which may be acquired within 60 days pursuant to
outstanding stock options.
(11) Includes 3,250 shares which may be acquired within 60 days pursuant to
outstanding stock options.
(12) Includes 255,811 shares which may be acquired within 60 days pursuant to
outstanding stock options.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chairman of the Board and Chief Executive Officer and each of the four other
most highly compensated executive officers of the Company (the "Named
Executives") for the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS(#) COMPENSATION(1)
- ---------------------------------------- ---------- ---------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Walter E. Johnson....................... $ 325,000 $ 662,500 $ 6,006 250,900 $ 4,500
Chairman & Chief Executive Officer
Paul B. Murphy, Jr...................... 175,000 87,500 6,660 60,425 4,500
President
Sharon K. Sokol......................... 125,000 45,000 2,842 7,875 3,750
Executive Vice President
Yale Smith.............................. 125,000 14,000 4,732 7,125 3,750
Executive Vice President
Steve D. Stephens....................... 125,000 50,000 3,000 19,625 3,750
Executive Vice President
</TABLE>
- ------------
(1) Consists of the Company's contribution to the Company's 401(k) Plan.
OPTION GRANTS DURING 1996
The following table contains information concerning the grant of stock
options under the Company's 1996 Stock Option Plan to the Named Executives
during fiscal year 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES IN EXERCISE TERM(1)
OPTIONS FISCAL YEAR PRICE EXPIRATION ------------------------
NAME GRANTED(#) 1996 ($/SH) DATE 0%($) 5%($)
- ------------------------------------- ----------- ------------ -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Walter E. Johnson.................... 250,900 60.03% $16.50 11/19/06 $ -- $ 2,603,529
Paul B. Murphy, Jr................... 60,425 14.46% 16.50 11/19/06 -- 627,016
Sharon K. Sokol...................... 7,875 1.88% 16.50 11/19/06 -- 81,717
Steve D. Stephens.................... 19,625 4.70% 16.50 11/19/06 -- 203,644
Yale Smith........................... 7,125 1.70% 16.50 11/19/06 -- 73,934
NAME 10%($)
- ------------------------------------- -----------
Walter E. Johnson.................... $ 6,597,855
Paul B. Murphy, Jr................... 1,588,981
Sharon K. Sokol...................... 207,087
Steve D. Stephens.................... 516,074
Yale Smith........................... 187,364
</TABLE>
- ------------
(1) The amounts shown under these columns are the result of calculations at 0%
and at the 5% and 10% rates required by the Securities and Exchange
Commission and are not intended to forecast future appreciation of the
Company's stock price.
7
<PAGE>
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information concerning the value of
unexercised options held by each of the Named Executives at December 31, 1996.
None of the Named Executives exercised any stock options during the year ended
December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
1996 DECEMBER 31, 1996(1)
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Walter E. Johnson....................... 342,160 288,750 $ 5,349,236 $ 406,500
Paul B. Murphy, Jr...................... 19,400 106,425 288,948 585,133
Sharon K. Sokol......................... 14,076 55,425 226,616 614,047
Yale Smith.............................. 17,300 45,200 278,530 489,008
Steve D. Stephens....................... 17,300 57,700 278,530 489,008
</TABLE>
- ------------
(1) The value is based on $16.50 per share.
On January 31, 1997, Walter E. Johnson exercised an option for 250,000 of
the 342,160 exercisable shares shown in the above table. Such option was granted
to Mr. Johnson in 1989 in connection with his employment by the Bank at that
time and was exercisable at a price of $.40 per share. Following his exercise of
such option, Mr. Johnson sold such 250,000 shares in a private transaction.
EMPLOYMENT AGREEMENTS
Walter E. Johnson, Paul B. Murphy, Jr., Sharon K. Sokol, Yale Smith, Steve
D. Stephens, David C. Farries and Joseph H. Argue have entered into change in
control agreements with the Company. Each agreement is for a term of three years
and automatically renews each year absent notice to the contrary from the
Company. Each agreement provides that upon the occurrence of a change in
control, (i) the agreement is converted into a three-year employment agreement,
which provides for a minimum annual compensation equal to the employee's current
base salary plus the highest annual cash bonus paid to the employee during the
three preceding years, (ii) all stock options held by the employee become fully
exercisable (regardless of whether then vested) and (iii) all restrictions on
any restricted stock granted to the employee shall lapse. Such employment
agreement also provides that if the employee is thereafter terminated without
cause or the employee terminates his or her employment as a result of the
employer's breach of the agreement, the employee shall be entitled to receive
from the Company a lump-sum severance payment equal to the discounted present
value of the amount of compensation payable under such agreement for the
remainder of the three-year term thereof. The employment agreements also
automatically renew each year absent notice to the contrary from the Company.
EMPLOYEE STOCK OPTION PLANS
The Company has two employee stock option plans, which were approved by the
Bank's shareholders in 1989 and 1993, respectively, and were assumed by the
Company upon its formation, effective June 30, 1996. The 1989 and 1993 stock
option plans (the "Former Option Plans") reserve shares for the granting of
"non-qualified" options to key employees of the Company to purchase Common Stock
at a price which may be less than the fair market value on the dates of grant.
For those options where the exercise price is less than the fair market value of
the stock at the date of grant, the difference is considered compensation
expense and is recognized ratably over the vesting period. The Company has
recognized approximately $135,000, $132,000 and $187,000 of compensation expense
in connection with the Former Option Plans during 1996, 1995 and 1994,
respectively. Generally, under the Former Option Plans, options vest ratably
over five to seven years, and must be exercised no later than three months after
the employee's termination with the Company.
The Company's shareholders adopted a new stock option plan in 1996 (the
"1996 Option Plan") which authorizes the issuance of up to 650,000 shares of
Common Stock under both "non-qualified" and "incentive" stock options to
employees and "non-qualified" stock options todirectors who are not
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employees. A total of 650,000 shares of Common Stock have been authorized for
issuance under the 1996 Option Plan. Generally, under the 1996 Option Plan, it
is intended that the options will vest 60% at the end of the third year
following the date of grant and an additional 20% at the end of each of the two
following years; however, an individual option may vest as much as 20% at the
end of the first or second year following the date of grant if necessary to
maximize the "incentive" tax treatment to the optionee for the particular option
being granted. Options under the 1996 Option Plan generally must be exercised
within ten years following the date of grant or no later than three months after
the optionee's termination with the Company, if earlier. Upon adoption of the
1996 Option Plan, the Former Option Plans were terminated with respect to all
authorized shares for which options had not been granted.
At December 31, 1996, options for 1,523,650 shares granted to 79 employees
and non-employee directors (including options granted under the Directors' Plan
for the 1996 calendar year) were outstanding, with per share exercise prices
ranging from $.40 to $16.50. Options for 418,000 shares were granted in 1996 at
exercise prices ranging from $9.00 to $16.50 per share, and no options were
exercised in 1996. At December 31, 1996, options to purchase an aggregate of
600,443 shares were exercisable and 271,375 shares were reserved for future
grants.
401(K) PLAN
The Bank has adopted a contributory profit sharing plan pursuant to
Internal Revenue Code Section 401(k) covering substantially all employees
("401(k) Plan"). Each year the Bank determines, at its discretion, the amount of
matching contributions. Beginning July 1, 1994, the Bank has elected to match
50% of the employee contributions not to exceed 3% of the employee's annual
compensation. For the period July 1, 1993 to June 30, 1994, the Bank elected to
match 100% of the employee contributions not to exceed 5% of the employee's
annual compensation. Total plan expense charged to the Company's operations for
1996, 1995 and 1994 was approximately $180,000, $136,000 and $146,000,
respectively.
During April, 1993, the 401(k) Plan was amended to allow the Bank to
contribute shares of Bank common stock (valued at the approximate fair market
value on the date of contribution) instead of cash. Pursuant to the formation of
the Company in 1996, all rights to acquire Bank common stock under the 401(k)
Plan were converted into rights to acquire Common Stock. Under the 401(k) Plan,
250,000 shares of Common Stock are issuable. A total of 17,435 shares, at prices
ranging from $9.20 to $10.20 per share, were issued to the 401(k) Plan during
1996.
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Many of the directors and executive officers of the Company and their
associates, which include corporations, partnerships and other organizations in
which they are officers or partners or in which they and their immediate
families have at least a 5% interest, are customers of the Bank. During 1996 the
Bank made loans in the ordinary course of business to certain directors of the
Company and their associates, all of which the Company believes were on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with persons unaffiliated
with the Company and did not involve more than the normal risk of collectibility
or present other unfavorable features. Loans to directors, executive officers
and principal shareholders of the Company (i.e., those who own 10% or more of
the outstanding shares of Common Stock) are subject to limitations contained in
the Federal Reserve Act, the principal effect of which is to require that
extensions of credit by the Bank to executive officers, directors and principal
shareholders satisfy the foregoing standards. On December 31, 1996, all of such
loans aggregated approximately $8.3 million, which was 13.5% of the Bank's Tier
1 capital at such date. The Company expects to have such transactions or
transactions on a similar basis with its directors, executive officers and
principal shareholders and their associates in the future.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is pleased to present
this report on executive compensation. Prior to November 18, 1996, the
Compensation Committee of the Bank's Board of Directors consisted of Walter E.
Johnson, John W. Johnson and Michael T. Willis. As a member of this Committee,
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Walter E. Johnson participated in the determination of Committee recommendations
to the Executive Committee of the Bank's Board of Directors as to compensation
for executive officers, including himself. Final determinations of such
compensation were made by such Executive Committee. On November 18, 1996, the
Company's Board of Directors established the Compensation Committee consisting
of John B. Brock III, John W. Johnson (Chairman) and Michael T. Willis,
described above, and the former Compensation Committee of the Bank's Board of
Directors was terminated. This report describes the elements of the Company's
executive officer compensation programs and the basis on which 1996 compensation
determinations were made by the Compensation Committee with respect to the
executive officers of the Company, including the Named Executives.
COMPENSATION PHILOSOPHY AND OVERALL OBJECTIVES
The goal of the Company's executive compensation policy is to ensure that
executive compensation is linked directly to continuous improvements in
corporate performance and increases in shareholder value, while concurrently
ensuring that key employees are motivated and retained. The following objectives
have been established by the Compensation Committee as guidelines for
compensation decisions:
o The Company must provide a competitive total compensation package that
enables the Company to attract and retain key executives.
o All of the Company's compensation programs must be integrated with its
annual and long-term business objectives so that executives remain
focused on the fulfillment of these objectives.
o The Company's compensation package must include a variable component
that directly links compensation with the overall performance of the
Company, thereby expressly aligning executive compensation with the
interest of shareholders.
The Compensation Committee regularly reviews the Company's compensation
programs to ensure that remuneration levels and incentive opportunities are
competitive and reflect performance. The various components of the compensation
programs for executive officers are discussed below.
BASE SALARY
Base salary levels are largely determined through comparison with banking
organizations of a size similar to the Company. Both local and regional surveys
are utilized to establish base salaries that are within the range of those
persons holding positions of comparable responsibility at other banking
organizations of a size and complexity similar to the Company. Actual base
salaries also are intended to reflect individual performance contributions as
determined through job evaluations. In addition to individual job performance
and the above-referenced market comparisons, other factors may be taken into
consideration, such as cost of living increases as well as an individual's
perceived potential with the Company. All executive officer base salary levels
are considered by the Compensation Committee to be competitive within a
necessary and reasonable range.
It has become the established practice of the Compensation Committee to
review and, if deemed appropriate, adjust the base salaries of the Company's
executive officers on a yearly basis. Accordingly, base salaries were reviewed
and adjusted during 1996, and the base salaries of the Named Executives in the
compensation table appearing in this Proxy Statement reflect the fully
annualized base salaries as adjusted and implemented in 1996.
EMPLOYEE STOCK OPTION PLANS
The Company's officers are eligible to participate in the Employee Stock
Option Plans referred to in this Proxy Statement. The objective of these Plans
is to create competitive levels of compensation tied directly to the attainment
of financial objectives which the Compensation Committee believes are the
primary determinants over time of share price. More specifically, these Plans
are designed to foster a systematic management focus on the corporate goal of
consistent and steady earnings growth. Potential awards for executive officers
are intended by the Compensation Committee to be consistent with incentive
bonuses paid by banking companies of a size similar to that of the Company,
provided that actual bonuses
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remain subject to increase or decrease on the basis of the Company's actual
audited performance and at the discretion of the Compensation Committee.
1996 COMPENSATION OF THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
In reviewing the 1996 compensation of Walter E. Johnson, the Company's
Chairman of the Board and Chief Executive Officer, the Compensation Committee
undertook the same evaluation set forth above with respect to executive
officers. Mr. Johnson's base salary is reviewed on a yearly basis and most
recently was reviewed and adjusted in January, 1996. His base salary is
considered to be reasonable and competitive based on published executive
compensation surveys. His bonus for 1996 performance was determined in December
1996 based on earnings through September 1996. The Compensation Committee
members were provided data concerning individual compensation history, executive
compensation survey data, and comparative information concerning performance.
Mr. Johnson's 1996 bonus award was paid in recognition of the 29.9% increase in
the Company's primary earnings per share and the 32.3% increase in the Company's
net income. In recognition of the outstanding performance of Walter E. Johnson,
resulting in the Company's growth from $43 million in assets at June 30, 1989 to
$913 million in assets at September 30, 1996, and resulting in the public
offering of the Company's Common Stock, which realized an estimated 550%
increase in value in the Company's Common Stock since 1989, the Board of
Directors approved a special one time bonus paid to Walter E. Johnson in
December, 1996, in the amount of $500,000.
ITEM 2.
APPOINTMENT OF AUDITORS
Pursuant to the recommendation of the Audit Committee, the Board of
Directors appointed Coopers & Lybrand L.L.P., independent public accountants, to
audit the consolidated financial statements of the Company for the year ending
December 31, 1997. Coopers & Lybrand L.L.P. has audited the Bank's financial
statements since 1983 and the Company's consolidated financial statements since
its inception in 1996. The Company is advised that no member of Coopers &
Lybrand L.L.P. has any direct or material indirect financial interest in the
Company or, during the past three years, has had any connection with the Company
in the capacity of promoter, underwriter, voting trustee, director, officer or
employee.
Ratification of this appointment shall be effective upon receiving the
affirmative vote of the holders of a majority of the Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting. Under Texas
law, an abstention would have the same effect as a vote against this proposal,
but a broker non-vote would not be counted for purposes of determining whether a
majority had been achieved.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
RATIFICATION OF THIS APPOINTMENT.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent auditors. A representative of
Coopers & Lybrand L.L.P. is expected to be present at the Annual Meeting, will
be offered the opportunity to make a statement if such representative desires to
do so and will be available to respond to appropriate questions.
ITEM 3.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment(s) thereof, it is
intended that the enclosed proxy will be voted in accordance with the judgment
of the persons voting the proxy.
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SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company at its principal
executive office by December 24, 1997, in order for such proposals to be
included in the Company's proxy statement and form of proxy for such meeting.
Shareholders submitting such proposals are requested to address them to the
Secretary, Southwest Bancorporation of Texas, Inc., 4400 Post Oak Parkway,
Houston, Texas 77027.
In addition, the Company's Bylaws provide that only such business as is
properly brought before the Annual Meeting will be conducted. For business to be
properly brought before the meeting or nominations of persons for election to
the Board of Directors to be properly made at the Annual Meeting by a
shareholder, notice must be received by the Secretary at the Company's offices
not later than the close of business on the 70th day prior to the anniversary
date of the immediately preceding Annual Meeting; provided, however, that in the
event that the date of Annual Meeting is more than 20 days before such
anniversary date, such notice must be so delivered not later than the close of
business on the 10th day following the day on which public disclosure of the
date of such meeting is first made by the Company. Such notice to the Company
must also provide certain information set forth in the Bylaws. A copy of the
Bylaws may be obtained upon written request to the Secretary.
ALL SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
David C. Farries
EXECUTIVE VICE PRESIDENT,
TREASURER AND SECRETARY
Houston, Texas
April 24, 1997
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PROXY SOUTHWEST BANCORPORATION OF TEXAS, INC. PROXY
PROXY FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Walter E. Johnson, John W. Johnson and David
C. Farries, and each of them, with or without the others, with full power of
Substitution, to vote all shares of stock that the undersigned is entitled to
vote at the 1997 Annual Meeting of Shareholders of Southwest Bancorporation of
Texas, Inc. (the "Company"), to be held at 4400 Post Oak Parkway, Houston,
Texas, on May 20, 1997, at 5:00 p.m. (Houston time) and all adjournments and
postponements thereof as follows:
1. ELECTION OF DIRECTORS: [ ] WITHHOLD AUTHORITY
[ ] FOR all nominees listed below to vote for all nominees listed below
(except as marked to the
contrary below)
INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, MARK A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
John B. Brock III J. David Heaney Andres Palandjoglou
2. Proposal to ratify the appointment of Coopers & Lybrand L.L.P. as
independent public accountants for the year ended December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- --------------------------------------------------------------------------------
(Continued and to be signed on reverse side)
<PAGE>
(Continued from other side)
3. In their discretion, upon any other business as may properly come before
said meeting.
This proxy will be voted as you specify above. If no specification is made,
this Proxy will be voted with respect to item (1) FOR the nominees listed and
with respect to item (2) FOR ratification of the appointment of Coopers &
Lybrand L.L.P. as independent accountants for the year ended December 31, 1997.
The undersigned hereby acknowledges receipt of the Notice of the 1997 Annual
Meeting and related Proxy Statement and the Company's 1996 Annual Report to
Shareholders. Dated ___________________________ , 1997
_________________________________________
Stockholder's Signature(s)
_________________________________________
Signature if held jointly
NOTE: Joint owners must each sign. Please
sign your name exactly as it appears on
your stock certificate. When signing as
attorney, executor, administrator,
trustee or guardian, please give full
title. If held by a corporation, please
sign in the full corporate name by the
president Or other
(PLEASE RETURN THIS SIGNED PROXY CARD IN THE ACCOMPANYING ADDRESSED ENVELOPE)
