SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
BAY BANCSHARES, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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BAY BANCSHARES, INC.
1001 HIGHWAY 146 SOUTH
LA PORTE, TEXAS 77571
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY MAY 26, 1999
To the Shareholders of Bay Bancshares, Inc.:
The 1999 Annual Meeting of Shareholders (the "Meeting") of Bay
Bancshares, Inc. (the "Company") will be held at 1001 Highway 146 South, La
Porte, Texas, on Wednesday, May 26, 1999, beginning at 1:30 p.m. (local time),
for the following purposes:
1. To elect three directors of Class II to serve on the Board of
Directors of the Company until the Company's 2002 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, 1999; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on April 6, 1999 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/ L. D. WRIGHT
L. D. Wright
Chief Executive Officer
La Porte, Texas
April 26, 1999
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>
BAY BANCSHARES, INC.
1001 HIGHWAY 146 SOUTH
LA PORTE, TEXAS 77571
PROXY STATEMENT
FOR
1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 26, 1999
April 26, 1999
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Bay Bancshares, Inc. (the
"Company") for use at the 1999 Annual Meeting of Shareholders of the Company to
be held at 1001 Highway 146 South, La Porte, Texas, on Wednesday, May 26, 1999,
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 1999 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 April 26, 1999.
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.
The Board of Directors knows of no other matters to be presented at the
Meeting. If any other matter should be presented at the Meeting upon which a
vote may be properly taken, shares represented by an executed and unrevoked
proxy received by the Board of Directors may be voted with respect thereto in
accordance with the judgment of the proxies. The proxy also confers on the
proxies the discretionary authority to vote with respect to any matter presented
at the Meeting for which advance notice was not received by the Company in
accordance with the Company's Bylaws.
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 soliciting material to the
beneficial owners of the common stock, par value $1.00 per
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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, 1998, 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 April
6, 1999 (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 1,993,603 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
II 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 ten 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 II directors expires at the Meeting. The terms of
the current Class III and Class I directors expire at the annual meetings of
shareholders in 2000 and 2001, respectively. The three Class II nominees, if
elected at the Meeting, will serve until the annual meeting of shareholders in
2002.
The Board of Directors has nominated Knox W. Askins, Kim E. Love and Ruede
M. Wheeler for election as Class II directors at the Meeting. Mr. Askins has
served as a Class I director since the Company's 1998 annual meeting of
shareholders. Ms. Love and Dr. Wheeler are currently serving as Class II
directors.
The Class II 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 any or all 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 for one or more but not all of the
nominees, all shares of Common Stock represented by any such proxy will be voted
FOR the election of the nominees 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.
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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 POSITION WITH THE COMPANY AND BAYSHORE NATIONAL BANK ("BANK") AGE
- ---- ------------------------------------------------------------- ---
<S> <C> <C>
Knox W. Askins Class I Director of the Company and Director of the Bank 61
Kim E. Love Class II Director of the Company and Director of the Bank; Controller 39
of the Company and Chief Financial Officer of the Bank
Ruede M. Wheeler, D.D.S. Class II Director of the Company and Director of the Bank 65
</TABLE>
KNOX W. ASKINS. Mr. Askins has been a director of Bayshore National Bank
(the "Bank") since 1967. He became a director of the Company when it was formed
in 1982. He serves as a member of the Bank's Asset/Liability Committee,
Compliance Committee and the Watchlist Committee. Mr. Askins also serves as
Chairman of the Company's Audit Committee. Mr. Askins is the President of Askins
& Armstrong, P.C., where he has been practicing law since 1965. He received a
B.A. in General Studies from the University of Houston and his Juris Doctorate
from the University of Houston Law Center.
KIM E. LOVE, CPA. Ms. Love joined the Bank in 1989 as Cashier. She was
promoted to Chief Financial Officer of the Bank in 1992. In addition, she serves
as Controller of the Company. She became a director of the Company and Bank in
May 1998. She serves as a member of the Company's Audit Committee and the Bank's
Asset/Liability Committee. Ms. Love began her banking career in 1977 at First
City Bank - Bellaire. She was promoted to Vice President and Cashier in 1984.
Next, Ms. Love was the Cashier at Charter National Bank - Westheimer from 1984
through 1986. She has a B.S. in Accounting from Virginia Commonwealth
University, where she graduated Magna Cum Laude.
RUEDE M. WHEELER, D.D.S.. Dr. Wheeler has been a director of the Bank
since 1977. He became a director of the Company when it was formed in 1982. He
is the Co-Chairman of the Bank's Internal Credit Review Committee and serves on
the Bank's Executive Committee, Directors' Loan Committee and Compliance
Committee. Dr. Wheeler also serves on the Company's Compensation Committee. In
Addition, he is a member of the Bank's Executive Committee. Dr. Wheeler received
a B.S. from Texas A&M University and a Doctor of Dental Sciences from the
University of Texas.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS.
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CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Company's Class I and III directors, whose terms of office do not expire at the
Meeting and certain officer of the Company(other than Ms. Love):
<TABLE>
<CAPTION>
NAME POSITIONS AGE
- ---- --------- ---
<S> <C> <C>
Albert D. Fields Class I Director and Treasurer of the Company; 48
Director of the Bank and President of the Bank
Eddie V. Gray Class III Director of the Company and Director of the Bank 63
Doug Latimer Chairman of the Board and Class III Director of the 56
Company; Chairman of the Board and Director of the
Bank
Lindsay R. Pfeiffer Vice Chairman of the Board and Class III Director of the 49
Company; Vice Chairman of the Board and Director
of the Bank
Ken Strum Class I Director of the Company and Director of the Bank 65
James N. Wallace Class III Director of the Company and Director of the Bank 57
L. D. Wright Class I Director, Chief Executive Officer and President of 52
the Company; Director and Chief Executive Officer of
the Bank
</TABLE>
ALBERT D. FIELDS. Mr. Fields has been employed by the Bank since 1978. He
became a director of the Company in 1982, a director of the Bank in 1984 and was
promoted to President of the Bank in 1985. He was named Treasurer of the Company
in 1982. Mr. Fields serves on the Bank's Directors' Loan Committee, Internal
Credit Committee and Watchlist Committee. Mr. Fields began his banking career at
American Bank in Odessa, Texas in 1972. Next, he worked for Allied Merchants
Bank in Port Arthur, Texas from 1976 to 1978, where he was Assistant Comptroller
in 1976 and promoted to Vice President in 1977. He has a B.B.A. from the
Southwest Texas State University. In addition, he is a graduate of the School of
Banking of the South at Louisiana State University and the National Commercial
Lending School at the University of Oklahoma.
EDDIE V. GRAY. Mr. Gray became a director of both the Company and the Bank
in 1991. Mr. Gray serves on the Bank's Directors' Loan Committee and the Bank's
Internal Credit Review Committee. Mr. Gray is the owner of Gray Enterprises, a
real estate development company. He received a B.S. and an M.S. in Geology from
Texas A&M University. He is active in the Baytown area, where he is a member of
Rotary and the Goose Creek Stream Greenbelt Development Committee. Mr. Gray was
honored in 1996 as the Citizen of the Year by the Baytown Sun and as the Exxon
Refiner of the Year. In January of 1999, Mr. Gray was honored with the
dedication of the Eddie V. Gray Wetlands Education and Recreation Center in
Baytown, Texas.
DOUG LATIMER. Mr. Latimer became a director of both the Company and the
Bank in 1989. In June of 1997, he was elected Chairman of the Board of both the
Company and the Bank. He serves as the Chairman of the Bank's Compliance
Committee and also serves on the Bank's Loan Committee, Internal Credit Review
Committee and Watchlist Committee, and on the Company's Compensation Committee.
In addition, he is the Chairman of the Bank's Executive Committee. Mr. Latimer
is the President and
4
<PAGE>
owner of Mechanical Repair & Engineering, Inc., a specialty machine shop which
he formed in 1974. He received a B.S. in Mechanical Engineering from Louisiana
State University and an M.B.A. from the University of Houston.
LINDSAY R. PFEIFFER. Mr. Pfeiffer has been an Advisory Director of the
Bank since 1990. He was elected Vice Chairman of the Board of both the Company
and the Bank in June 1997, when his father, Harold Pfeiffer, retired as Chairman
of the Board. Mr. Pfeiffer serves on the Bank's Loan Committee, Watchlist
Committee, Internal Credit Review Committee and Asset/Liability Committee and on
the Company's Compensation Committee. In addition, he is Vice Chairman of the
Bank's Executive Committee. He is the President of Pfeiffer & Son, an electrical
contracting company, where he has worked since 1973. Mr. Pfeiffer received a
B.A. in Business Administration from the University of Texas and an A.S. in
Electrical Technology from San Jacinto College.
KEN STRUM. Mr. Strum became a director of the Bank in 1980 and a director
of the Company in 1988. He is the Co-Chairman of the Bank's Directors' Loan
Committee and also serves on the Bank's Asset/Liability Committee, Compliance
Committee, Directors' Watchlist Committee, Internal Credit Review Committee and
the Company's Audit Committee. Mr. Strum is the President and owner of Ken Strum
Insurance Agency, Inc., which he founded in 1972. He received a B.B.A. from the
University of Mississippi.
JAMES N. WALLACE. Mr. Wallace became a director of both the Company and
the Bank in 1990. He is Co-Chairman of the Internal Credit Review Committee and
also serves on the Bank's Compliance Committee, Directors' Loan Committee and
Watchlist Committee and on the Company's Audit Committee and Compensation
Committee. In addition, he is a member of the Bank's Executive Committee. Mr.
Wallace is the Chairman of Bayou Properties Co., a commercial real estate
development firm, where he has worked since 1976. He received a B.S. in
Education from Southwest Texas University and an M.A. from Southwest Texas
University.
L. D. WRIGHT. Mr. Wright joined the Bank in 1987 as Chief Executive
Officer and as a director of both the Company and the Bank. He serves as a
member of the Bank's Asset/Liability Committee, Directors' Watchlist Committee,
Internal Credit Review Committee, Directors' Loan Committee and the Company's
Audit and Compensation Committee. In addition, he is a member of the Bank's
Executive Committee. His banking career began in 1966 at Irwin Union Bank and
Trust Company in Columbus, Indiana, where he served as the Credit Card Manager.
Next, Mr. Wright served as Vice President and Manager of Retail Banking at First
Galesburg National Bank, Galesburg, Illinois, in 1972, and was promoted to
Senior Vice President and Manager of the Lending Division in 1977. From 1982 to
1987, Mr. Wright served as President and Chief Executive Officer of First City
Bank - Almeda Genoa and was promoted to Cluster Manager/President and Chief
Executive Officer in 1987, where he was responsible for the supervision of six
banks with total assets of $350 million. He attended Vincennes University and
graduated from the Stonier Graduate School of Banking at Rutgers University.
OPERATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held nine meetings during 1998.
There were two Directors 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 1998, the Audit Committee held
eleven meetings. The Audit Committee is composed of Messrs. Askins (Chairman),
Strum, Wallace and Wright and Ms. Love, each of whom except Ms. Love and Mr.
Wright 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
5
<PAGE>
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 1998, the Compensation Committee held
six meetings. The Compensation Committee is comprised of Messrs. Latimer,
Pfeiffer, Wallace and Wheeler each of whom is an outside director, and Jay
Marks, a Senior Advisory Director.
DIRECTOR COMPENSATION
Directors of the Company do not receive any fees for attending Company
Board meetings. Directors of the Bank receive a fee of $500 for each meeting of
the Bank's Board of Directors attended. Fees are not paid for attending Company
or Bank committee meetings.
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
Chief Executive Officer and the other executive officer of the Company whose
compensation exceeded $100,000 (determined as of the end of the last fiscal
year) for each of the three fiscal years ended December 31, 1998:
<TABLE>
<CAPTION>
VALUE OF SECURITIES
OTHER ANNUAL OPTIONS UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION GRANTED OPTIONS COMPENSATION (1)
- --------------------------- ---- -------- -------- ------------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
L. D. Wright, Chief ................... 1998 $173,250 $ 57,750 $ 50,237 (2) $ -- -- $ 4,787
Executive Officer of the .......... 1997 165,000 54,000 50,237 (3) 249,248 (5) 35,411 4,143
Company and the Bank .............. 1996 156,000 52,500 51,583 (4) 110,868 (5) 18,478 3,120
Albert D. Fields, Treasurer ........... 1998 113,500 13,500 921 -- -- 3,247
of the Company and ................ 1997 108,000 20,000 -- -- -- 2,962
President of the Bank ............. 1996 97,500 11,375 850 -- -- 1,950
</TABLE>
- -------------------------
(1) Consists of contributions by the Company to the Company's 401(k) Plan.
(2) Includes $15,992 received by Mr. Wright as dividends on the shares of
phantom stock granted under the Bay Bancshares, Inc. 1993 Phantom Stock
Plan ("Phantom Plan").
(3) Includes $14,003 received by Mr. Wright as dividends on the shares of
phantom stock granted under the Phantom Plan.
(4) Includes $7,937 received by Mr. Wright as dividends on the shares of
phantom stock granted under the Phantom Plan.
(5) Consists of shares of phantom stock granted under the Phantom Plan. As of
December 31, 1998, Mr. Wright held options for 66,630 shares of phantom
stock under the Phantom Plan, and the estimated value of these shares was
$966,135. At December 31, 1998, 48,569 of these shares were vested with
each grant vesting over a three year period. Mr. Wright receives dividends
on the shares of phantom stock granted to him under the Phantom Plan.
Shares of Phantom Stock, although vested, are not redeemable for shares of
Common Stock until approved by the Board of Directors of the Company.
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<PAGE>
STOCK OPTION PLANS
The Company has outstanding options to purchase 35,800 shares of Common
Stock issued pursuant to an incentive stock option plan approved by shareholders
in 1997 (the "1997 Stock Option Plan"). The 1997 Stock Option Plan authorizes
the issuance of options for up to 150,000 shares of Common Stock. Under the 1997
Stock Option Plan, the vesting of options is governed by individual option
agreements. Each of the option agreements currently outstanding provides that
20% of the options granted vest immediately following the date of grant and an
additional 20% each year thereafter. Options granted under the 1997 Stock Option
Plan generally must be exercised within ten years following the date of grant.
The fair market value of stock options is based on trades in the Common Stock.
The Company's Board of Directors and shareholders approved a second stock
option plan in 1997 (the "1997 Incentive Plan") which authorizes the issuance of
up to 1,000,000 shares of 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 Incentive 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 1997 Incentive Plan generally must be exercised
within ten years following the date of grant or no later than three months after
an optionee's termination with the Company, if earlier. The 1997 Incentive Plan
also provides for the granting of restricted stock awards, stock appreciation
rights, phantom stock awards and performance awards on substantially similar
terms. No options or other types of awards have been granted under the 1997
Incentive Plan. The 1997 Plan provides that in the event of a change in control
of the Company, all options granted immediately vest and become exercisable. In
addition, the 1997 Plan permits the Compensation Committee, which administers
the 1997 Plan, discretion in the event of a change in control to modify in
certain respects the terms of awards under the 1997 Plan, including (i)
providing for the payment of cash in lieu of such award, (ii) limiting the time
during which an option may be exercised, (iii) making adjustments to options to
reflect the change in control and (iv) providing that options shall be
exercisable for another form of consideration in lieu of the Common Stock
pursuant to the terms of the transaction resulting in a change in control.
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. Although, it does
not require the fair value based method to be adopted, 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, will in its annual reporting provide the pro
forma disclosures of net income and earnings per share.
OPTION GRANTS DURING 1998
There were no option grants to executive officers or directors during
fiscal 1998.
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<PAGE>
STOCK OPTION EXERCISES AND FISCAL YEAR END VALUES
The following table sets forth certain information concerning the number
and value of unexercised options held by each of the named executive officers at
December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DOLLAR DECEMBER 31, 1998 DECEMBER 31, 1998 (2)
ACQUIRED UPON VALUE ------------------------------ ---------------------------
NAME OPTION EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
L. D. Wright ................... -- -- 48,569 (3) 18,061 (3) $ 361,839 $ 134,554
Albert D. Fields ............... -- -- 2,000 3,000 14,900 22,350
</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, 1998, minus the
exercise price
(3) Represents shares of phantom stock issued under the Phantom Plan. Shares
of phantom stock represent the right to receive an equal number of shares
of Common Stock. No shares of phantom stock maybe redeemed for Common
Stock until approved by the Board of Directors.
BENEFIT PLAN
The Company has established a contributory profit sharing plan pursuant to
Internal Revenue Code Section 401(k) covering substantially all employees (the
"Benefit Plan"). The Company has hired the Hand Group to serve as the Benefit
Plan administrator and investment advisor. Each year the Company determines, in
its discretion, the amount of matching contributions. The Company has elected to
match 50% of employee contributions not to exceed 3% of the employee's annual
compensation. Total Benefit Plan expense charged to the Company's operations for
1998, 1997 and 1996 was approximately $79,000, $58,000 and $27,000,
respectively. In addition, the Company elected to allow employees to invest the
matching portion in shares of Common Stock.
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Many of the directors of the Bank and 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 1998, 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, 1998, all of such loans aggregated $2.6
million which was approximately 13.7% of the Company's Tier 1 capital at such
date. The Company expects to have such transactions on a similar basis with is
directors, executive officers and principal shareholders and their associates in
the future.
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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's Common Stock as of the Record Date, by (i)
each director and executive officer 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.
PERCENTAGE
NUMBER BENEFICIALLY
NAME OF SHARES OWNED
- ------------------------------------------------ --------- ------------
Knox W. Askins ................................. 8,402 *
Albert D. Fields ............................... 12,229(1) *
Eddie V. Gray .................................. 29,321(2) 1.47%
W.E. Gwaltney, Jr .............................. 143,343(3) 7.19%
Heartland Advisors ............................. 124,900(4) 6.27%
Doug Latimer ................................... 93,563(5) 4.69%
Kim E. Love .................................... 3,200(6) *
Harold P. Pfeiffer ............................. 155,865(7) 7.82%
Lindsay R. Pfeiffer ............................ 39,461(8) 1.84%
Ken Strum ...................................... 25,051(9) 1.26%
James N. Wallace ............................... 36,867 1.85%
Ruede M. Wheeler, D.D.S ........................ 43,713(10) 2.19%
L. D. Wright ................................... 86,733(11) 4.35%
Directors and Executive
Officers as a group ....................... 378,540 18.81%
- ---------------------------------------------
* Denotes ownership less than 1.0%
(1) Includes 2,000 shares which may be acquired within 60 days pursuant to
options granted under the 1997 Stock Option Plan.
(2) Includes 26,797 shares held of record by Grayco Development Co., of which
Mr. Gray is the owner.
(3) This information regarding beneficial ownership is included in reliance on
a Schedule 13G filed in February 1997. The address of W.E. Gwaltney is
3039 Fondren, La Porte, Texas 77571.
(4) The information regarding beneficial ownership is included in reliance on
a Schedule 13G filed in January 1999 by Heartland Advisors reflecting
beneficial ownership as of December 31, 1998. The address of Heartland
Advisors is 790 North Milwaukee Street, Milwaukee, Wisconsin 53202.
Heartland Advisors has sole dispositive power over 124,900 shares of
Common Stock.
(5) Consists of 83,563 shares held of record by Douglas and Margaret Latimer
Family Trust of which Mr. Latimer is the trustee.
(6) Includes 2,000 shares which may be acquired within 60 days pursuant to
options granted under the 1997 Stock Option Plan.
(7) The address of Harold P. Pfeiffer is 619 Brownell, La Porte, Texas 77571.
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(8) Includes 17,525 shares held of record by Pfeiffer & Sons, Inc., of which
Mr. Pfeiffer is President, 1,203 shares held of record by the Katy Knox
Education Trust, 1,203 shares held of record by the Nicholas Riley
Education Trust, 1,203 shares held of record by the Noah Riley Education
Trust, 1,203 shares held of record by the Jessica Bullock Education Trust,
1,203 shares held of record by the Christopher Bullock Education Trust,
1,203 shares held of record by the Joseph Pfeiffer Education Trust and
1,203 shares held of record by the Jonathan Pfeiffer Education Trust. Mr.
Pfeiffer is the co-trustee of each of these education trusts and has
shared voting and investment power with respect to the shares of Common
Stock held by such trusts.
(9) Includes 2,245 shares held of record by Ken Strum Insurance Agency, Inc.,
of which Mr. Strum is the President.
(10) Includes 11,044 shares held of record by the Ruede Wheeler, DDS, Inc.
Profit Sharing Trust of which Dr. Wheeler is the trustee, 2,000 shares
held of record by Ruede Wheeler, DDS, Inc. of which Dr. Wheeler is the
President, 450 shares held of record by the Ruede Wheeler, IRA and 450
shares held of record by the Charlcya Wheeler IRA.
(11) Does not include 48,569 shares of Common Stock which may be acquired upon
redemption of 48,569 shares of phantom stock pursuant to the Phantom Plan.
However, pursuant to the Phantom Plan, the shares of phantom stock are not
redeemable for Common Stock until approved by the Board of Directors.
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, 1998, all
Section 16(a) reporting requirements applicable to the Company's officers,
directors and greater than ten-percent shareholders were complied with.
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, 1999. Grant Thornton LLP has served as the Company's independent audit firm
continuously for six 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.
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SHAREHOLDER PROPOSALS AT THE NEXT ANNUAL MEETING
OF SHAREHOLDERS
In order for shareholder proposals submitted pursuant to the Commission's
Rule 14a-8 to be included in the Company's proxy statement and form of proxy
relating to the Company's 2000 Annual Meeting of Shareholders, such proposals
must be submitted to the Secretary of the Company at the 1001 Highway 146 South,
La Porte, Texas 77571 not later than December 28, 1999.
A shareholder choosing not to use the procedures established in Commission
Rule 14a-8 to submit a proposal for action at the Company's 2000 Annual Meeting
of Shareholders may submit a proposal which meets the requirements outlined in
the Company's Bylaws. A proposal submitted pursuant to the Company's Bylaws will
not be included in the Company's proxy statement and form of proxy for the 2000
Annual Meeting of Shareholders, but may be properly brought before the meeting.
Such proposals must be submitted to the Secretary of the Company at the
Company's principal officers not later than 60 days prior to the meeting. Such
notice to the Company must also provide certain information set forth in the
Bylaws.
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 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/ L. D. WRIGHT
L. D. Wright
Chief Executive Officer
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REVOCABLE PROXY
BAY BANCSHARES, INC.
1999 ANNUAL MEETING OF SHAREHOLDERS - MAY 26, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The 1999 Annual Meeting of Shareholders of Bay Bancshares, Inc. (the
"Company") will be held at 1001 highway 146 South, La Porte, Texas on Wednesday,
May 26, 1999, beginning at 1:30 p.m. (local time). The undersigned hereby
acknowledges receipt of the related Notice of 1999 Annual Meeting of
Shareholders and Proxy Statement dated April 26, 1999 accompanying this proxy.
The undersigned hereby appoints Doug Latimer and Lindsay R. Pfeiffer, and
each of them, with or without the other, as attorneys and agents, with full
power of substitution, to vote as proxy all shares of Common Stock, $1.00 par
value per share, of the Company that the undersigned is entitled to vote, and
otherwise to act on behalf of the undersigned at the 1999 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
Nominees are Knox W. Askins, Kim E. Love and Ruede M. Wheeler, D.D.S..
[ ] FOR all nominees listed above, except as marked to the contrary above
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above
(INSTRUCTION: To withhold authority to vote for any individual nominee, draw
a line through the name of such nominee in the list above.)
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, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy will be voted as directed. If no direction is made, this proxy
will be voted FOR the election of all nominees for directors named herein to
serve on the Board of Directors until the 2002 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, 1999.
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 sigh 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.
Date:___________________, 1999
______________________________
______________________________
Signature(s) of shareholder(s)
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED EVELOPE.
