<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
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 Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
Prime Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-12.
(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:
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(5) Total fee paid:
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[ ] 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:
------------------------------------------------------------------------
<PAGE> 2
PRIME BANCSHARES, INC.
12200 NORTHWEST FREEWAY
HOUSTON, TEXAS 77092
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY APRIL 16, 1998
Shareholders of Prime Bancshares, Inc.:
The 1998 Annual Meeting of Shareholders (the "Meeting") of Prime
Bancshares, Inc. (the "Company") will be held at 12200 Northwest Freeway,
Houston, Texas, on Thursday, April 16, 1998, beginning at 1:30 p.m.
(local time), for the following purposes:
1. To elect two directors of Class I to serve on the Board of Directors
of the Company until the Company's 2001 Annual Meeting of Shareholders and until
their successors are duly elected and qualified;
2. To consider and act upon a proposal to ratify the appointment of
Grant Thornton LLP as the independent auditors of the books and accounts of the
Company for the year ending December 31, 1998; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on March 12, 1998 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the Meeting or at any adjournments thereof. A list of shareholders entitled to
vote at the Meeting will be available for inspection by any shareholder at the
offices of the Company during ordinary business hours for a period of at least
ten days prior to the Meeting.
You are cordially invited and urged to attend the Meeting. If you are
unable to attend the Meeting, you are requested to sign and date the enclosed
proxy and return it promptly in the enclosed envelope. If you attend the
Meeting, you may vote in person, regardless of whether you have given your
proxy. Your proxy may be revoked at any time before it is voted.
By order of the Board of Directors,
/s/ E. J. GUZZO
-----------------------------------
E. J. Guzzo
President
Houston, Texas
March 17, 1998
YOUR VOTE IS IMPORTANT.
TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, DATE,
AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE AT YOUR
EARLIEST CONVENIENCE, REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING. NO
ADDITIONAL POSTAGE IS NECESSARY IF THE PROXY IS MAILED IN THE UNITED STATES. THE
PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS VOTED AT THE MEETING.
<PAGE> 3
PRIME BANCSHARES, INC.
12200 NORTHWEST FREEWAY
HOUSTON, TEXAS 77092
MARCH 17, 1998
------------------------
PROXY STATEMENT
FOR
1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, APRIL 16, 1998
------------------------
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Prime Bancshares, Inc. (the
"Company") for use at the 1998 Annual Meeting of Shareholders of the Company to
be held at 12200 Northwest Freeway, Houston, Texas, on Thursday, April 16, 1998,
beginning at 1:30 p.m. (local time), and any adjournment thereof (the "Meeting")
for the purposes set forth in this Proxy Statement and the accompanying Notice
of 1998 Annual Meeting of Shareholders ("Notice of Meeting"). This Proxy
Statement, the Notice of Meeting and the enclosed form of proxy will first be
sent to shareholders on or about March 17, 1998.
PROXIES
This Proxy Statement is furnished to the shareholders of the Company
for solicitation of proxies on behalf of the Board of Directors of the Company
for use at the Meeting, 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 Meeting.
Shares represented at the 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 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 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
<PAGE> 4
soliciting material to the beneficial owners of the common stock, par value
$0.25 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, 1997, accompanies but does not
constitute part of this proxy statement.
VOTING SHARES AND VOTING RIGHTS
Only holders of record of Common Stock at the close of business on
March 12, 1998 (the "Record Date"), are entitled to notice of and to vote at the
Meeting and any adjournments or postponements thereof. At that time, there were
outstanding 9,353,020 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 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.
The affirmative vote of the holders of a plurality of the outstanding
shares of Common Stock represented at the Meeting is required to elect the Class
I nominees to the Board of Directors. There will be no cumulative voting in the
election of directors. Abstentions and shares held of record by a broker or
nominee that are voted on any matter are included in determining whether a
quorum exists. An abstention, a non-vote or a withholding of authority to vote
with respect to one or more nominees for director will not have the effect of a
vote against such nominee or nominees.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock represented at the Meeting is required to approve the
appointment of the auditors. An abstention or a non-vote will have the effect of
a vote against the appointment.
ELECTION OF DIRECTORS
ELECTION PROCEDURES; TERM OF OFFICE
The Board of Directors currently consists of six directors. In
accordance with the Company's Amended and Restated Bylaws, members of the Board
of Directors are divided into three classes, Class I, Class II and Class III.
The members of each class are elected for a term of office to expire at the
third succeeding annual meeting of shareholders following their election. The
term of office of the current Class I directors expires at the Meeting. The
terms of the current Class II and Class III directors expire at the annual
meeting of shareholders in 1999 and 2000, respectively. The two Class I
nominees, if elected at the Meeting, will serve until the annual meeting of
shareholders in 2001.
The Board of Directors has nominated Fredric M. Saunders and E. J.
Guzzo for election as Class I directors at the Meeting. Mr. Saunders and Mr.
Guzzo are currently serving as Class I directors.
The Class I nominees receiving the affirmative vote of the holders of a
plurality of the shares of Common Stock represented at the Meeting will be
elected. Unless the authority to vote for the election of directors is withheld
as to either or both of the nominees, all shares of Common Stock represented by
proxy will be voted FOR the election of the nominees. If the authority to vote
for the election of directors is withheld
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<PAGE> 5
as to one but not both of the nominees, all shares of Common Stock represented
by any such proxy will be voted FOR the election of the nominee as to whom such
authority is not withheld. If a nominee becomes unavailable to serve as a
director for any reason before the election, the shares represented by proxy
will be voted for such other person, if any, as may be designated by the Board
of Directors. The Board of Directors, however, has no reason to believe that
any nominee will be unavailable to serve as a director.
Any director vacancy occurring after the election may be filled only by
a majority of the remaining directors, even if less than a quorum of the Board
of Directors. A director elected to fill a vacancy will be elected for the
unexpired portion of the term of his predecessor in office.
NOMINEES FOR ELECTION
The following table sets forth certain information with respect to each
nominee for election as a director of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH COMPANY
- ---- --- ----------------------
<S> <C> <C>
Fredric M. Saunders 66 Chairman of the Board, Class I Director
and Chief Executive Officer of the Company
E. J. Guzzo 54 Class I Director and President of the Company
</TABLE>
Fredric M. Saunders. Mr. Saunders joined Prime Bank (the "Bank"), in
1962 as President and director. In 1969, Mr. Saunders began serving as Chairman
of the Bank. The Company was founded in 1984, and Mr. Saunders served as
Chairman and President from its inception until 1996, when Mr. Guzzo began
serving as President of the Company and Mr. Saunders retained the position of
Chairman of the Company. Mr. Saunders began his banking career in 1957 with
MacGregor Park National Bank as an Assistant Vice President. Next, Mr. Saunders
served as Cashier of Bellfort State Bank in 1959 through 1960, and as Cashier
for Fairbanks State Bank in 1961. He also served as an Executive Vice President
at Heights Savings and Loan Association from 1969 through 1970. Mr. Saunders
received his BBA from the University of Texas at Austin and is involved in the
Rotary Club of Northshore, the North Channel Area Chamber of Commerce and the
YMCA.
E. J. Guzzo. Mr. Guzzo joined the Bank as Executive Vice President and
director in 1983 and became President of the Bank in 1984. He was elected as a
director of the Company in 1985 and became President of the Company in 1996. Mr.
Guzzo began his banking career in 1973 with Guaranty Bank & Trust in Alexandria,
Louisiana. He also served as Executive Vice President for Community Bank of
LaFourche, Louisiana from 1977 to 1979, and as Vice President and Manager for
the Bank of New Orleans from 1979 to 1983. Mr. Guzzo was an officer in the
United States Army and served in Vietnam. He received his BBA from Northwestern
State University in Louisiana. Mr. Guzzo is a past Chairman of the North Channel
Area Chamber of Commerce.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS.
3
<PAGE> 6
CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Company's Class II and III directors, whose terms of office do not expire at the
Meeting, and certain officers of the Company (other than Mr. Fredric M. Saunders
and Mr. E. J. Guzzo):
<TABLE>
<CAPTION>
NAME Position Age
---- -------- ---
<S> <C> <C>
L. Anderson Creel.......... Secretary and Treasurer of the Company and
Senior Vice President and Chief Financial
Officer of the Company and the Bank 50
James G. Dickson, Jr....... Senior Vice President of the Company and the
Bank 53
Jerry S. Dominy............ Class II Director of the Company and the 63
Bank
E. J. Guzzo................ Director and President of the Company and
the Bank 54
Steven H. Jackson.......... Senior Vice President of the Company and the
Bank and Chief Credit Officer of the Bank 37
Walter L. Kopycinski....... Senior Vice President of the Company and the
Bank and Operations Division Manager of the
Bank 61
David Pasternak............ Class II Director of the Company and the 75
Bank
Fredric M. Saunders........ Chairman of the Board and Chief Executive
Officer of the Company and the Bank 66
Stuart D. Saunders......... Class III Director, Senior Vice President and 33
General Counsel of the Company and the
Bank
James B. Wesley............ Class III Director of the Company and the 57
Bank
</TABLE>
L. Anderson Creel. Mr. Creel joined the Bank in 1992 as Senior Vice
President and Chief Financial Officer with 19 years of banking experience,
including serving as Senior Vice President and Controller of First City National
Bank of Houston and Founders Bank in Oklahoma City. He assumed the additional
responsibilities of Secretary and Treasurer of the Company in 1996. Mr. Creel
was elected Senior Vice President of the Company in 1997. In addition, Mr. Creel
serves as an Advisory Director for the Bank. Mr. Creel received a BS in
Accounting from Louisiana Tech University and is a certified public accountant.
4
<PAGE> 7
James G. Dickson, Jr. Mr. Dickson joined the Bank in 1990 as Senior
Vice President and a branch manager. In 1992, he was promoted to Senior Vice
President in charge of branch administration. Mr. Dickson also serves as an
Advisory Director of the Bank. Mr. Dickson was elected a Senior Vice President
of the Company in 1997. Mr. Dickson came to the Bank with 12 years of prior
banking experience, including serving as President and Director of First
Freeport National Bank and Senior Vice President of First City Bank -- Humble.
Mr. Dickson was an officer in the United States Army and served in Vietnam. He
received his BBA from the University of Texas at Austin and his MBA from Texas
Christian University.
Jerry S. Dominy. Mr. Dominy became a director of the Bank in 1970. He
has served as a director of the Company since it was founded in 1984. Prior to
Mr. Dominy's affiliation with the Company and the Bank, he served as an Advisory
Director for North Side Bank from 1961 to 1964 and as a director of Northshore
Bank from 1964 to 1970. Mr. Dominy was a principal owner and Chief Executive
Officer of Dominy, Ford & McPherson, Inc., a Houston based appraisal firm, from
1962 to 1996. He is currently semi-retired from the appraisal business. Mr.
Dominy received his BBA from the University of Houston.
Steven H. Jackson. Mr. Jackson joined the Bank in 1989 as Senior Vice
President. He has since been promoted to Chief Credit Officer. In addition, Mr.
Jackson serves as an Advisory Director of the Bank. Mr. Jackson was elected a
Senior Vice President of the Company in 1997. Mr. Jackson began his banking
career with First City National Bank of Houston from 1981 to 1984 and then
served as Vice President and Unit Manager for Bank One from 1984 to 1989. He
received his BBA from the University of Texas at Austin and is involved in
numerous civic and community activities including the Rotary Club of Houston and
St. Martin's Episcopal Church.
Walter L. Kopycinski. Mr. Kopycinski joined the Bank in 1991 as
Operations Division Manager. He has since been promoted to Senior Vice President
and Operations Division Manager. He also serves as an Advisory Director of the
Bank. Mr. Kopycinski was elected a Senior Vice President of the Company in 1997.
Mr. Kopycinski has 39 years experience in bank operations. Prior to joining the
Bank, he was employed by First City Bank-Texas in both Houston and Dallas, where
he held various departmental manager positions, including Operations Division
Manager with First City in Dallas. Mr. Kopycinski attended the University of
Houston and is also a graduate of the Southwestern Graduate School of Banking at
Southern Methodist University. Mr. Kopycinski is on the board of directors for
the Clearing House of the Southwest, a non-profit organization which performs
check clearing and other services for Texas banks.
David Pasternak. Mr. Pasternak has been a director of the Bank since
the Bank was chartered in 1958. Mr. Pasternak became a director of the Company
when it was formed in 1984. In 1989, Mr. Pasternak began serving as Chairman of
the Bank's Investment Committee. Mr. Pasternak's principal occupation is
investing in real estate and securities.
Stuart D. Saunders. Mr. Saunders began serving the Bank as an Advisory
Director in 1991. In 1994, he joined the Bank as Senior Vice President and
General Counsel and became Senior Vice President and General Counsel of the
Company in 1997. Mr. Saunders became a director of the Company and the Bank in
1997. Prior to joining the Bank, Mr. Saunders practiced law from 1990 to 1994 as
an associate in the financial services section of Bracewell & Patterson, L.L.P.
He obtained his BBA from the University of Texas at Austin and his JD from
Baylor University School of Law. Mr. Saunders is a member of the Advisory
Committee for the Institution of Shipboard Education's Semester at Sea program
and is involved in various other civic and community activities. Mr. Saunders is
the son of Fredric M. Saunders.
James B. Wesley. Mr. Wesley became a director of the Bank in 1985. He
has served as Chairman of the Bank's Audit Committee since 1989 and was elected
as a director of the Company in 1996. Mr. Wesley is
5
<PAGE> 8
a shareholder in the law firm of Wesley & Herzog, P.C. He is board certified in
Estate Planning and Probate Law, Commercial Real Estate Law, and Farm & Ranch
Real Estate Law by the Texas State Board of Legal Specialization. Mr. Wesley is
also a certified public accountant. He worked as a division manager of trust
operations at Texas Commerce Bank from 1966 to 1969. Mr. Wesley obtained his BBA
from the University of Texas at Austin and his JD from the University of
Houston.
Each officer of the Company is elected by the Board of Directors of the
Company and holds office until his successor is duly elected and qualified or
until his or her earlier death, resignation or removal.
OPERATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held nine meetings during 1997.
There was no director who attended less than 75% of the aggregate of the (i)
total number of meetings of the Board and (ii) total number of meetings held by
committees on which he served.
The Board of Directors has established Audit and Compensation
Committees. The Audit Committee reviews the general scope of the audit conducted
by the Company's independent auditors and matters relating to the Company's
internal control systems. In performing its function, the Audit Committee meets
separately with representatives of the Company's independent auditors and with
representatives of senior management. During 1997, the Audit Committee held four
meetings. The Audit Committee is composed of Messrs. Wesley (Chairman),
Pasternak and Dominy, each of whom is an outside director.
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. The Compensation
Committee also 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. During 1997, the Compensation Committee held one
meeting. The Compensation Committee is comprised of Messrs. Pasternak
(Chairman), Dominy and Wesley, each of whom is an outside director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the formation of the Compensation Committee in 1997, matters
related to compensation, employee benefit matters and stock options were
considered by the Human Resources Committee of the Bank, which included E. J.
Guzzo, L. Anderson Creel, Stuart D. Saunders and Fredric M. Saunders. As members
of this committee, Messrs. Guzzo, Creel, Stuart D. Saunders and Fredric M.
Saunders participated in determinations as to compensation and grants of stock
options to executive officers, including themselves. Final determination
regarding compensation and stock options was made by the Board of Directors of
the Bank.
DIRECTOR COMPENSATION
Directors of the Company do not receive any fees for attending Company
Board meetings. Non-employee directors of the Bank receive a fee of $250 for
each meeting of the Bank's Board of Directors attended and outside directors
receive a $300 fee for each Board Committee meeting attended. Mr. Wesley
receives a fee of $10,000 per quarter for serving as Chairman of the Audit
Committee. The Bank has historically paid outside the Bank directors an annual
bonus based on the Bank's performance in lieu of a retainer. In 1997, the Bank
paid each of Messrs. Dominy, Pasternak and Wesley, who are also directors of the
Company, a bonus of $5,000.
6
<PAGE> 9
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION TABLE
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 each of the other five most highly compensated
executive officers of the Company (determined as of the end of the last fiscal
year) for each of the two fiscal years ended December 31, 1997:
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION(1)
------------------ ------ ------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Fredric M. Saunders......................... 1997 $ 205,100 $ 121,000 $ 829 $ 2,371
Chairman of the Board 1996 220,000 121,000 -- 2,250
E. J. Guzzo................................. 1997 220,000 110,000 2,970 2,371
President 1996 200,000 110,000 3,000 2,250
L. Anderson Creel........................... 1997 100,000 27,500 6,000 1,590
Chief Financial Officer 1996 100,000 27,500 9,000 1,538
James G. Dickson, Jr........................ 1997 110,000 28,250 -- 1,650
Senior Vice President 1996 110,000 28,250 12,550 1,793
Steven H. Jackson........................... 1997 110,000 30,250 7,800 1,767
Senior Vice President 1996 110,000 30,250 10,800 1,767
Walter L. Kopycinski........................ 1997 100,000 27,500 6,000 1,590
Senior Vice President 1996 100,000 27,500 9,000 1,574
</TABLE>
- ----------
(1) Consists of contributions by the Company to the 401(K) Plan.
STOCK OPTION PLANS
The Company has outstanding options to purchase 600,000 shares of
Common Stock issued pursuant to the 1984 Incentive Stock Option Plan (the "1984
Plan") and the 1993 Incentive Stock Option Plan (the "1993 Stock Option Plan.")
Under the 1984 Plan, 10% of the options granted vest immediately following the
date of grant and an additional 10% each year thereafter. Options granted under
the 1984 Plan generally must be exercised within 10 years following the date of
grant or no later than three months after termination of the optionee's
employment, if earlier. Under the 1993 Plan, 20% of the options granted vest at
the end of the first year following the date of grant and an additional 20% each
year thereafter. Options granted under the 1993 Plan generally must be exercised
within 10 years following the date of grant or no later than three months after
termination of the optionee's employment, if earlier.
The Company's Board of Directors and shareholders approved a new stock
option plan in 1997 (the "1997 Plan") which authorizes the issuance of up to
1,000,000 shares of Company Common Stock under both "non-qualified" and
"incentive stock" options to employees and "non-qualified" stock options to
directors who are not employees. Generally, under the 1997 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
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<PAGE> 10
of grant if necessary to maximize the "incentive" tax treatment to the optionee
for the particular option being granted. Options under the 1997 Plan generally
must be exercised within 10 years following the date of grant or no later than
three months after optionee's termination with the Company, if earlier. No
options have been granted under the 1997 Plan.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"). This statement established fair value based
accounting and reporting standards for all transactions in which a company
acquires goods or services by issuing its equity investments, which includes
stock-based compensation plans. Under SFAS 123, compensation cost is measured at
the grant date based on the value of the award and is recognized over the
service period, which is usually the vesting period. Fair value of stock options
is determined using an option-pricing model. This statement encourages companies
to adopt as prescribed the fair value based method of accounting to recognize
compensation expense for employee stock compensation plans. However, it does not
require the fair value based method to be adopted but a company must comply with
the disclosure requirements set forth in the statement. The Company has
continued to apply accounting in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, ("APB 25") and related
Interpretations, and, accordingly, provides the pro forma disclosures of net
income and earnings per share.
OPTION GRANTS DURING 1997
The following table sets forth certain information concerning stock
options granted during fiscal 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
------------------------------------------------------------
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN FISCAL PRICE PER EXPIRATION -----------------------
NAME GRANTED YEAR SHARE DATE 5% 10%
- ---------------------- ---------- ------------- --------- ---------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
E. J. Guzzo........... 120,000 50.00% $4.17 January 15, 2007 $314,699 $797,509
L. Anderson Creel..... 30,000 12.50% 4.17 January 15, 2007 78,675 199,377
James G. Dickson, Jr.. 30,000 12.50% 4.17 January 15, 2007 78,675 199,377
Steven H. Jackson..... 30,000 12.50% 4.17 January 15, 2007 78,675 199,377
Walter L. Kopycinski.. 30,000 12.50% 4.17 January 15, 2007 78,675 199,377
</TABLE>
8
<PAGE> 11
STOCK OPTION EXERCISES AND FISCAL YEAR END VALUES
The following table sets forth certain information concerning stock
options exercised during fiscal 1997 and the number and value of unexercised
options held by each of the named executives at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS IN-THE-MONEY OPTIONS AT
SHARES DOLLAR AT DECEMBER 31, 1997 DECEMBER 31, 1997(2)
ACQUIRED UPON VALUE ------------------------------- -------------------------------
NAME OPTION EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- --------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
E. J. Guzzo ........... 90,000 $ 228,600 12,000 120,000 $ 222,600 $ 2,005,200
L. Anderson Creel ..... -- -- 48,000 42,000 884,280 719,820
James G. Dickson, Jr .. 3,000 5,520 33,000 42,000 606,030 719,820
Steven H. Jackson ..... -- -- 48,000 42,000 884,280 719,820
Walter L. Kopycinski .. -- -- 48,000 42,000 884,280 719,820
</TABLE>
- --------------
(1) Market value of the underlying securities at exercise date, minus the
exercise price.
(2) Market value of the underlying securities at December 31, 1997, minus the
exercise price.
BENEFIT PLAN
The Company has established a contributory profit sharing plan pursuant
to Internal Revenue Code Section 401(k) covering substantially all employees
(the "Plan"). The Bank is the Plan administrator and has hired Smith Barney,
Inc. to serve as the trustee and investment advisor. Each year the Company
determines, in its discretion, the amount of matching contributions. The Company
has elected to match 25% of employee contributions not to exceed 6% of the
employee's annual compensation. As an additional incentive to employees, the
Plan does not have a vesting schedule, and thus all employees are 100% vested
from the moment of contribution. Total Plan expenses charged to the Company's
operations for 1997, 1996 and 1995 were approximately $118,000, $97,000 and
$96,000, respectively.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is a report from the Compensation Committee of the
Company describing the policies pursuant to which compensation was paid to
executive officers of the Company and the Bank during 1997.
The Compensation Committee of the Board of Directors is responsible for
developing and making recommendations to the Board with respect to the Company's
executive compensation policies. David Pasternak (Chairman), Jerry S. Dominy and
James B. Wesley serve on the Compensation Committee. The Compensation Committee
prepares a report which sets forth the components of the Company's executive
officer compensation program and describes the basis on which the 1997
compensation determinations were made by the Compensation Committee with respect
to the executive officers of the Company and the Bank.
9
<PAGE> 12
COMPENSATION PHILOSOPHY AND BASE SALARY
The Company believes that compensation of its executive officers should
enhance and reinforce the goals of the Company for profitable growth and
continuation of a sound overall condition by providing key employees with
additional financial rewards for the attainment of such growth and stable
financial and operating conditions. The Compensation Committee believes that
these goals are best supported by rewarding individuals for outstanding
contributions to the Company's success and by compensating its executive
officers competitively with the compensation of similarly situated executive
officers.
The base salary levels are determined through comparisons of salary
levels of executive officers of banks and bank holding companies of similar
size. In addition, the Compensation Committee takes into account individual
experience, individual performance, individual potential, cost of living
considerations and specific issues particular to the Company. Executive officer
base salaries are considered by the Compensation Committee to be competitive and
reasonable.
INCENTIVE COMPENSATION PLAN
In addition to the base salary, the Company has adopted an incentive
compensation program (the "Incentive Plan") for certain officers of the Company
and the Bank, including the named executive officers of the Company. The
Incentive Plan provides that certain officers will receive incentive
compensation equal to a designated percentage of such officer's base salary
depending on both individual consideration and Company performance. The level of
incentive compensation awarded is based on a graduated scale with the maximum
incentive granted only if the Company achieves a return on equity of 16% or
above. The entire incentive compensation fund is allocated among key officers of
the Company and the Bank based on a number of factors including base salary,
level of responsibility, individual performance and, where applicable, Company
and Bank performance.
CONTRIBUTORY PROFIT SHARING PLAN
In addition, each of the named executive officers are participants in
the Company-wide contributory profit sharing plan established pursuant to
Internal Revenue Code Section 401(k) covering substantially all employees. The
Company partially matches employee contributions to this plan up to 6% of the
employee's base salary.
INCENTIVE STOCK OPTION PLANS
Finally, each of the named executive officers may be selected to
participate in the Company's Incentive Stock Option Plans. In 1997, options for
the purchase of shares of the Company's Common Stock were granted pursuant to
the 1993 Incentive Stock Option Plan to the following executive officers: (i)
Mr. Guzzo received options to purchase 120,000 shares; (ii) Mr. Creel received
options to purchase 30,000 shares; (iii) Mr. Dickson, Jr. received options to
purchase 30,000 shares, (iv) Mr. Jackson received options to purchase 30,000
shares and (v) Mr. Kopycinski received options to purchase 30,000 shares. Option
share amounts noted above have been adjusted to reflect the thirty-for-one stock
split (effected as a stock dividend) that was implemented in August, 1997.
The Compensation Committee will continue to monitor the base salary
levels and the various incentives of the named executive officers to ensure that
overall compensation is consistent with the Company's objectives and competitive
in the marketplace.
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<PAGE> 13
1997 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In reviewing the 1997 compensation of the Company's Chief Executive
Officer, Fredric M. Saunders, the Compensation Committee undertook the same
evaluation set forth above with respect to executive officers. In addition, the
Compensation Committee reviewed his compensation history, executive compensation
survey data and comparative performance information. Upon recommendation by the
Compensation Committee, the Board of Directors of the Bank set Mr. Saunders'
salary for 1997 at $205,100. In addition to his base salary, Mr. Saunders
participates in the Incentive Plan along with other key officers of the Company
and the Bank. From the Incentive Plan in 1997, Mr. Saunders earned a bonus of
$121,000 resulting in approximately 37% of his 1997 compensation being dependent
on the success of the Company. The amount contributed by the Company to the
401(k) plan for the benefit of Mr. Saunders in fiscal year 1997 was $2,371. The
Compensation Committee believes that Mr. Saunders' total compensation is
reasonable and competitive based on comparative performance information and the
overall performance of the Company.
The Compensation Committee
David Pasternak
Jerry S. Dominy
James B. Wesley
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Many of the directors, executive officers and principal shareholders of
the Company (i.e., those who own 10% or more of the Common Stock) 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 Company. During 1997
the Company made loans in the ordinary course of business to many of the
directors, executive officers and principal shareholders of the Company and
their associates, all of which 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
are subject to limitations contained in the Federal Reserve Act, the principal
effect of which is to require that extensions of credit by the Company to
executive officers, directors and principal shareholders satisfy the foregoing
standards. On December 31, 1997, all of such loans aggregated $863,000 which was
approximately 1.31% of the Company'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.
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<PAGE> 14
BENEFICIAL OWNERSHIP OF COMMON STOCK BY
MANAGEMENT OF THE COMPANY AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company Common Stock as of December 31, 1997, by (i)
directors and certain officers, including executive officers, of the Company,
(ii) each person who is known by the Company to own beneficially 5% or more of
the Common Stock 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 and the address of each
shareholder is the same as the address of the Company.
<TABLE>
<CAPTION>
NUMBER PERCENTAGE
NAME OF SHARES BENEFICIALLY OWNED
- ---------------------------------------- --------- ------------------
<S> <C> <C>
L. Anderson Creel....................... 80,970(1) 0.87%
James G. Dickson, Jr.................... 70,470(2) 0.75%
Jerry S. Dominy......................... 308,385(3) 3.30%
E. J. Guzzo............................. 532,402(4) 5.70%
Steven H. Jackson....................... 81,390(5) 0.87%
Walter L. Kopycinski.................... 61,170(6) 0.65%
David Pasternak......................... 360,006(7) 3.85%
Fredric M. Saunders..................... 3,180,720(8) 34.01%
Stuart D. Saunders...................... 10,260(9) 0.11%
James B. Wesley......................... 30,000 0.32%
Directors and Certain Officers as a
Group................................... 4,715,773 50.42%
</TABLE>
- ----------
(1) Includes 54,000 shares which may be acquired within 60 days pursuant to
outstanding stock options.
(2) Includes 39,000 shares which may be acquired within 60 days pursuant to
outstanding stock options.
(3) Includes 94,560 shares owned of record by the Dominy, Ford & Associates
Profit Sharing Plan, over which Mr. Dominy has sole voting and investment
power.
(4) Includes 273,000 shares owned of record by Guzzo Partners, Ltd., 8,700
shares held by the Bank as custodian for Mr. Guzzo's individual retirement
account, 54,000 shares which may be acquired within 60 days pursuant to
outstanding stock options and 1,740 shares owned of record by Mr. Guzzo's
two children. Mr. Guzzo has sole voting and investment power over all of
such shares.
(5) Includes 54,000 shares which may be acquired within 60 days pursuant to
outstanding stock options.
(6) Includes 54,000 shares which may be acquired within 60 days pursuant to
outstanding stock options.
(7) Consists of 195,360 shares owned of record by the David and Lillian
Pasternak Family Investment Partnership, Ltd., 40,805 shares owned by the
David Pasternak Grantor Retained Annuity Trust, and 123,841 shares owned by
the Lillian Pasternak Grantor Retained Annuity Trust. Mr. Pasternak has
shared voting and investment power over all of such shares.
12
<PAGE> 15
(8) Consists of 3,150 shares held of record by the Stuart D. Saunders Trust #1
of which Gayle Saunders, the wife of Fredric M. Saunders, is the trustee,
3,150 shares held of record by the Meredith A. Saunders Mason Trust #1 of
which Gayle Saunders, the wife of Fredric M. Saunders, is the trustee and
3,174,420 shares held of record by Mission-Heights Management Company,
Ltd., a Texas limited partnership ("Mission-Heights"). Fredric M. Saunders
is the managing general partner of Mission-Heights and has sole voting and
investment power over the shares held by Mission-Heights.
(9) Consists of 3,900 shares held by the Stuart D. Saunders Trust #2 of which
Stuart D. Saunders is the trustee, 4,080 shares held of record by the
Chandler Elizabeth Mason 1992 Trust of which Stuart D. Saunders is the
trustee and 2,280 shares held of record by the Trevor James Mason 1994
Trust of which Stuart D. Saunders is the trustee.
PERFORMANCE GRAPH
The following Performance Graph compares the cumulative total
shareholder return on the Company's Common Stock for the period from September
26, 1997, when the Common Stock was first listed on the Nasdaq National Market,
to December 31, 1997, with the cumulative total return of the S&P 500 Composite
Index and the Keefe, Bruyette & Woods, Inc.'s KBW 50 Bank Index for the same
period. Dividend reinvestment has been assumed. The Performance Graph assumes
$100 invested on September 26, 1997 in the Company's Common Stock, the S&P 500
Composite Index and the Keefe, Bruyette & Woods, Inc.'s KBW 50 Bank Index.
[GRAPH]
9/26/97 12/31/97
------------------
PBTX 100.00 119.49
KBW 50 100.00 105.87
S&P 500 100.00 103.11
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<PAGE> 16
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's directors and executive officers and
persons who own more than ten percent of the outstanding Common Stock to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than ten-percent shareholders are
required by regulation to furnish the Company with copies of all Section 16(a)
forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company, during the year ended December 31, 1997,
all Section 16(a) reporting requirements applicable to the Company's officers,
directors and greater than ten-percent shareholders were complied with except
that L. Anderson Creel, James G. Dickson, Jr., Jerry S. Dominy, E. J. Guzzo,
Steven H. Jackson, Walter L. Kopycinski, David Pasternak, Fredric M. Saunders,
Stuart D. Saunders, C. C. Smitherman and James B. Wesley were late in filing
their initial report of beneficial ownership on Form 3.
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Grant Thornton LLP as the
independent auditors of the books and accounts of the Company for the year
ending December 31, 1998. Grant Thornton LLP has served as the Company's
independent audit firm continuously for over ten years. At the Meeting, the
shareholders will be asked to consider and act upon a proposal to ratify the
appointment of Grant Thornton LLP. The ratification of such appointment will
require the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote and present in person or represented by
proxy at the Meeting. Representatives of Grant Thornton LLP will be present at
the Meeting, will be given an opportunity to make a statement (if they desire to
do so) and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY
SUCH APPOINTMENT.
SHAREHOLDER PROPOSALS AT THE NEXT ANNUAL MEETING
OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company at its principal
executive office by November 17, 1998, 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 of the Company at 12200 Northwest Freeway, Houston, Texas 77092.
OTHER MATTERS
The Board of Directors does not intend to bring any other matter before
the Meeting. Additionally, no shareholder of the Company has complied with the
advance notice provisions contained in the Company's Bylaws, which preclude the
bringing of matters before a meeting of shareholders unless such provisions are
complied with. Accordingly, no other matter is expected to be brought before the
Meeting. However, if any
14
<PAGE> 17
other matter does properly come before the Meeting, the proxies will be voted in
accordance with the discretion of the person or persons voting the proxies.
You are cordially invited to attend the Meeting. Regardless of whether
you plan to attend the Meeting, you are urged to complete, date, sign and return
the enclosed proxy in the accompanying envelope at your earliest convenience.
By order of the Board of Directors,
/s/ E. J. GUZZO
-----------------------------------
E. J. Guzzo
President
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<PAGE> 18
- --------------------------------------------------------------------------------
PROXY
PRIME BANCSHARES, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON THURSDAY, APRIL 16, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The 1998 Annual Meeting of Shareholders of Prime Bancshares, Inc. (the
"Company") will be held at 12200 Northwest Freeway, Houston, Texas, on Thursday,
April 16, 1998, beginning at 1:30 p.m. (local time). The undersigned hereby
acknowledges receipt of the related Notice of 1998 Annual Meeting of
Shareholders and Proxy Statement dated March 17, 1998 accompanying this proxy.
The undersigned hereby appoints Fredric M. Saunders and E. J. Guzzo and each
of them, attorneys and agents, with full power of substitution, to vote as proxy
all shares of Common Stock, par value $0.25 per share, of the Company owned of
record by the undersigned and otherwise to act on behalf of the undersigned at
the 1998 Annual Meeting of Shareholders and any adjournment thereof in
accordance with the directions set forth herein and with discretionary authority
with respect to such other matters, not known or determined at the time of the
solicitation of this proxy, as may properly come before such meeting or any
adjournment thereof.
This proxy is solicited on behalf of the Board of Directors of the Company
and will be voted FOR the following proposals unless otherwise indicated.
1. ELECTION OF DIRECTORS to serve until the 2001 Annual Meeting of Shareholders
and until their successors are duly elected and qualified.
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as otherwise indicated*) for all nominees listed below
</TABLE>
* INSTRUCTION: To withhold authority to vote for any nominee, draw a line
through the name of such nominee in the list below.
Fredric M. Saunders E. J. Guzzo
(CONTINUED AND TO BE SIGNED AND DATED ON OTHER SIDE)
- --------------------------------------------------------------------------------
<PAGE> 19
- --------------------------------------------------------------------------------
(CONTINUED FROM OTHER SIDE)
2. RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP as the independent
auditors of the books and accounts of the Company for the year ending
December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy is solicited by the Board of Directors and will be voted in
accordance with the undersigned's directions set forth herein. If no direction
is made, this proxy will be voted FOR the election of all nominees for director
named herein to serve on the Board of Directors until the 2001 Annual Meeting of
Shareholders and until their successors are duly elected and qualified and FOR
the ratification of the appointment of Grant Thornton LLP as the independent
auditors of the books and accounts of the Company for the year ending December
31, 1998.
Please sign your name exactly as it appears below. If shares are held
jointly, all joint owners should sign. If shares are held by a corporation,
please sign the full corporate name by the president or any other authorized
corporate officer. If shares are held by a partnership, please sign the full
partnership name by an authorized person. If you are signing as attorney,
executor, administrator, trustee or guardian, please set forth your full title
as such.
--------------------------------
--------------------------------
Signature(s) of Shareholder(s)
Date:
--------------------------------, 1998
- --------------------------------------------------------------------------------
