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 ss. 240.14a-11(c) or ss. 240.14a-12
PROSPERITY 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:
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:
<PAGE>
PROSPERITY BANCSHARES, INC.
3040 POST OAK BOULEVARD
HOUSTON, TEXAS 77056
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MAY 4, 1999
Shareholders of Prosperity Bancshares, Inc.:
The 1999 Annual Meeting of Shareholders (the "Meeting") of Prosperity
Bancshares, Inc. (the "Company") will be held at the main office of First
Prosperity Bank at 1301 N. Mechanic, El Campo, Texas, on Tuesday, May 4, 1999,
beginning at 3:00 p.m. (local time), for the following purposes:
1. To elect three directors of Class I 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
Deloitte & Touche 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 March 26, 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/ TRACY T. RUDOLPH
Tracy T. Rudolph
Chairman of the Board and President
Houston, Texas
April 1, 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>
PROSPERITY BANCSHARES, INC.
3040 POST OAK BOULEVARD
HOUSTON, TEXAS 77056
APRIL 1, 1999
------------------------
PROXY STATEMENT
FOR
1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MAY 4, 1999
------------------------
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Prosperity Bancshares, Inc.
(the "Company") for use at the 1999 Annual Meeting of Shareholders of the
Company to be held at the main office of First Prosperity Bank (the "Bank") at
1301 N. Mechanic, El Campo, Texas, on Tuesday, May 4, 1999, beginning at 3:00
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 1, 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.
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.
<PAGE>
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 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
March 26, 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 5,172,825 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 eight 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
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of shareholders in 2000 and 2001, respectively. The three Class I nominees, if
elected at the Meeting, will serve until the annual meeting of shareholders in
2002.
The Board of Directors has nominated. J.T. Herin, Charles M. Slavik
and Harrison Stafford for election as Class I directors at the Meeting. Messrs.
Herin, Slavik and Stafford 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 one or more 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 as to one or two but not all of the
nominees, all shares of Common Stock represented by any such proxy will be voted
FOR the election of the nominee or nominees, as the case may be, 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:
NAME AGE POSITIONS WITH COMPANY
- ----------------- --- --------------------------------
J. T. Herin 82 Class I Director of the Company
Charles M. Slavik 82 Class I Director of the Company
Harrison Stafford 86 Class I Director of the Company
J. T. HERIN. Mr. Herin has been a director of the Company since 1989.
His affiliation with the Bank started in 1953 with his election to the Board of
Directors. He is the owner of the J-Bar Ranch in Ganado.
CHARLES M. SLAVIK. Mr. Slavik has been a director of the Company
since 1993 and was a founding director of the Bank in 1949. Mr. Slavik is
currently Chairman of the Board of both Slavik's, Inc. and Slavik's Funeral
Home. Mr. Slavik attended St. Edward's University and Landig College of Mortuary
Science. He was commissioned as a Second Lieutenant in World War II and was
released from active duty as a Captain in 1946. Mr. Slavik has served as a
member of the Edna Rotary Club, Veterans of Foreign Wars, the Edna Hospital
Board and the Chamber of Commerce. From 1959 to 1963, Mr. Slavik served as Mayor
of Edna.
HARRISON STAFFORD. Mr. Stafford has been a director of the Company
since 1987 and was involved in the founding of the Bank in 1949. Mr. Stafford
engages in farming, ranching and investments. Mr. Stafford graduated from the
University of Texas, where he was a three year All-Conference football player.
Mr. Stafford has been inducted into the National Collegiate Football Hall of
Fame, the University of Texas Hall
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of Fame and the Texas High School Hall of Fame. Mr. Stafford has participated
actively in the Edna Rotary Club and the University of Texas Ex's Association,
and has served as president of the Edna Independent School District Board and as
a member of the Lavaca Navidad River Authority.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS.
CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to
the Company's Class II and Class III directors, whose terms of office do not
expire at the Meeting, and executive officers of the Company:
NAME POSITION AGE
- ---------------------- -------------------------------------------- -----
Harry Bayne........... Class II Director of the Company 58
James A. Bouligny..... Class II Director of the Company 62
David Hollaway........ Treasurer and Chief Financial Officer of the 42
Company; Senior Vice President and Chief
Financial Officer of the Bank
Tracy T. Rudolph...... Chairman of the Board, Class III Director and 59
President of the Company; Chairman of the
Board of the Bank
Robert Steelhammer.... Class II Director of the Company 57
David Zalman.......... Class III Director and Vice President/Secretary 42
of the Company; Director and President of the
Bank
HARRY BAYNE. Mr. Bayne has been a director of the Company since 1989.
He is President and Chief Executive Officer of Varitec Industries, Inc. in
Houston. Since 1967, Mr. Bayne has served as President of Bayne TV & Appliance
Co., a subsidiary of Varitec Industries, Inc. Mr. Bayne is active in the Houston
and Bay Area Chambers of Commerce.
JIM BOULIGNY. Mr. Bouligny has been a director of the Company since
1991. Mr. Bouligny is a name partner in the El Campo law firm of Duckett,
Bouligny & Collins, LLP. Mr. Bouligny received a Bachelor of Business
Administration degree and a Juris Doctor degree from the University of Texas.
Mr. Bouligny's civic activities include a 24 year tenure as a member of the
Board of Directors of Wharton County Junior College. He is currently a member of
the MG and Lillie Johnson Foundation.
DAVID HOLLAWAY. Mr. Hollaway has been Senior Vice President and Chief
Financial Officer of the Bank since 1992 and Treasurer of the Company since
1993. He became Chief Financial Officer of the Company in 1998. From 1990 to
1992, Mr. Hollaway worked for the Resolution Trust Corporation in its Gulf
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Coast Consolidated Office in Houston. From 1988 to 1990, he worked as the Cost
Accounting Manager of San Jacinto Savings Association in Bellaire, Texas. From
1981 to 1988, Mr. Hollaway was Vice President- Auditor of South Main Bank in
Houston. Mr. Hollaway is a Certified Public Accountant.
TRACY T. RUDOLPH. Mr. Rudolph founded the Company in 1983 and has
served as Chairman of the Board since its inception. From 1980 to 1986, Mr.
Rudolph was Chairman and Chief Executive Officer of South Main Bank in Houston.
Prior to that, he worked at Town & Country Bank in Houston from 1972 to 1980,
where he became President and Chief Executive Officer prior to the bank's
acquisition by Allied Bancshares, Inc. Mr. Rudolph has over 35 years of
commercial banking experience.
ROBERT STEELHAMMER. Mr. Steelhammer has been a director of the
Company since its inception. Mr. Steelhammer is a name partner with Steelhammer
& Miller, P.C. in Houston. He received a Bachelor of Science degree from the
University of Texas and a Juris Doctor degree from South Texas College of Law.
He is a member of the State Bar of Texas, a registered professional engineer for
the State of Texas and a member of the American Institute of Chemical Engineers.
DAVID ZALMAN. Mr. Zalman joined the Bank as President in 1986 and
became a director and Vice President/Secretary of the Company in 1987. From 1978
to 1986, Mr. Zalman was employed by Commercial Bancshares, Inc. in El Campo,
beginning as cashier and rising to become Chief Executive Officer. Mr. Zalman
received a Bachelor of Business Administration degree in Finance and Marketing
from the University of Texas in 1978. He has served as a member of the El Campo
City Council, the Edna Rotary Club and the El Campo Lion's Club and as president
of the West Wharton County United Way.
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 five meetings during 1998.
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 established Audit and Compensation Committees
in July 1998. The purpose of the Audit Committee is to review 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 will review reports from the Company's independent auditors
and meet separately with representatives of senior management. During 1998, the
newly formed Audit Committee held no meetings. The Audit Committee is comprised
of Messrs. Bayne, Bouligny and Steelhammer, each of whom is an outside director.
Prior to the formation of the Audit Committee, all matters relating to the
Company's external audit and internal control systems were reviewed by the Board
of Directors of the Bank.
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 and
Bank employees under such plans. The Compensation Committee is comprised of
Messrs. Bayne, Bouligny, Herin, Slavik, Stafford and Steelhammer, each of whom
is an outside director. The members of the newly formed Compensation Committee
were the same directors who handled
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all compensation, stock options and employee benefit matters prior to the
formation of the Compensation Committee. These directors held five meetings
during 1998 to review such compensation and employee benefit matters.
EMPLOYMENT AGREEMENTS
Tracy T. Rudolph and David Zalman have entered into employment
agreements with the Company in 1998. Each agreement is for an initial term of
three years and automatically renews each year thereafter unless terminated in
accordance with its terms. The employment agreements provide that if the
employee is terminated without cause (including constructive termination) or if
a change in control of the Company occurs, the employee shall be entitled to
receive from the Company a lump sum payment equal to three years' base salary.
The employment agreements do not contain non-compete restrictions. The employees
have the power to terminate the employment agreements upon 30 days prior notice.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the formation of the Compensation Committee in 1998, matters
related to compensation and employee benefit matters of the Company's executive
officers and stock options for employees of the Company and the Bank were
considered and determined by the Company's Board of Directors. However, because
such compensation matters directly affected Messrs. Rudolph and Zalman, who are
directors and executive officers of the Company, Messrs. Rudolph and Zalman did
not participate in such discussions or decisions. No member of the Compensation
Committee is or was an officer or employee of the Company or the Bank.
DIRECTOR COMPENSATION
Directors of the Company receive a $1,250 fee for meeting of the
Company's Board of Directors attended and no fees for each committee meeting
attended. Directors of the Bank receive a $350 fee for each meeting of the
Bank's Board of Directors attended and a $300 fee for each committee meeting
attended.
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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 Chief Executive Officer and the other most highly
compensated executive officer of the Company (determined as of the end of the
last fiscal year) for each of the two fiscal years ended December 31, 1998:
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
NAME AND ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------------------------------- ---- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Tracy T. Rudolph................................... 1998 $ 238,542 $ -- $ 7,129(1)
Chairman of the Board and President of the 1997 225,000 -- 6,324
Company; Chairman of the Board of the Bank
David Zalman....................................... 1998 206,667 -- 7,593(2)
Vice President/Secretary of the Company; 1997 185,000 -- 6,606
President of the Bank
</TABLE>
- ---------
(1) Consists of contributions by the Company to the 401(k) Plan of $4,531 in
1998 and $3,726 in 1997 and premiums paid by the Company on a life insurance
policy for the benefit of Mr. Rudolph.
(2) Consists of contributions by the Company to the 401(k) Plan of $4,533 in
1998 and $3,726 in 1997 and premiums paid by the Company on two life insurance
policies for the benefit of Mr. Zalman.
STOCK OPTION PLANS
The Company has outstanding options to purchase 320,000 shares of
Common Stock issued pursuant to a stock option plan approved by the shareholders
in 1995 (the "1995 Plan") for executive officers and directors. Under the 1995
Plan, the options vest ratably over a ten year period beginning on the date of
the grant; however, pursuant to the Incentive Stock Option Agreement
("Agreement") signed by each optionee, no options may be exercised until the
optionee has completed five years of employment with the Company after the date
of the grant. The options were granted at an average exercise price of $4.75.
Compensation expense was not recognized for the options because the options had
an exercise price approximating the fair value of the Common Stock at the time
of the grant. Although pursuant to the Agreement no options granted under the
1995 Plan will be exercisable until May 31, 2000, the 1995 Plan provides that
the Board of Directors may in its sole discretion accelerate the time at which
any option may be exercised. Options to purchase an additional 20,000 shares are
available for issuance under the 1995 Plan.
The Company's Board of Directors and shareholders approved a new
stock option plan in 1998 (the "1998 Plan") which authorizes the issuance of up
to 460,000 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 1998 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
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granted. Options under the 1998 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. The 1998 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 awards have been granted under the 1998 Plan. The 1998 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 1998 Plan permits the
Compensation Committee, which administers the 1998 plan, discretion in the event
of a change in control to modify in certain respects the terms of awards under
the 1998 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, provides the pro forma disclosures of net
income and earnings per share.
BENEFIT PLAN
The Company has established a contributory profit sharing plan (the
"Plan") pursuant to Section 401(k) of the Internal Revenue Code covering
substantially all employees. At least three months of service is required for an
employee to be eligible for employer-matching contributions. Participants may
contribute up to 15% of their annual compensation to the Plan, not to exceed the
maximum amount allowable under Internal Revenue Service regulations. Each year
the Company determines, in its discretion, the amount of matching contributions.
Total plan expenses charged to the Company's operations were approximately
$112,000, $87,000 and $72,000 in 1998, 1997 and 1996, 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 1998.
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. Harry Bayne, James A. Bouligny, J. T.
Herin, Charles M. Slavik, Harrison Stafford and Robert Steelhammer 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 1998 compensation determinations were made by
the Compensation Committee with respect to the executive officers of the Company
and the Bank.
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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 Compensation Committee establishes base salary levels for each
executive officer by comparison to competitive salary levels for the similar
executive officer job functions at banks and bank holding companies of similar
size in the Company's market areas. Base salaries approximate the median level
of such competitive rates and are adjusted based on factors such as 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.
CONTRIBUTORY PROFIT SHARING PLAN
In addition, each of the executive officers are participants in the
Company's 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, including contributions
by the executive officers, up to 7.5% of the employee's base salary.
STOCK OPTION PLANS
Stock options have been the Company's primary form of long-term
incentive compensation. There are currently 320,000 options outstanding under
the 1995 Plan, 140,000 of which are held by executive officers of the Company.
No additional options were granted to executive officers during 1998.
The Compensation Committee will continue to monitor the base salary
levels and the various incentives of the executive offices to ensure that
overall compensation is consistent with the Company's objectives and
competitiveness in the marketplace.
1998 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In reviewing the 1998 compensation of the Company's Chief Executive
Officer, Tracy T. Rudolph, 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. Rudolph's
salary for 1998 at $250,000. The amount contributed by the Company to the 401(k)
plan for the benefit of Mr. Rudolph in fiscal year 1998 was $4,531. The
Compensation
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Committee believes that Mr. Rudolph's total compensation is reasonable and
competitive based on comparative performance information and the overall
performance of the Company.
The Compensation Committee
Harry Bayne
Jim Bouligny
J. T. Herin
Charles Slavik
Harrison Stafford
Robert Steelhammer
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 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 $2.2 million which
was approximately 7.11% 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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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 the date hereof, by (i)
directors and 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.
NUMBER PERCENTAGE
NAME OF SHARES BENEFICIALLY OWNED
- ---------------------------------------- --------- ------------------
Harry Bayne............................. 94,709 1.83%
James A. Bouligny....................... 158,006 3.05%
J. T. Herin............................. 33,733 *
David Hollaway.......................... 2,440(1) *
Tracy T. Rudolph........................ 140,000(2) 2.71%
Charles M. Slavik....................... 34,990(3) *
Harrison Stafford....................... 90,300(4) 1.75%
Robert Steelhammer...................... 126,410(5) 2.44%
Evelyn M. Tittizer...................... 280,472(6) 5.42%
David Zalman............................ 367,034(7) 7.10%
Directors and Executive Officers as a
Group (9)............................ 1,047,622 20.25%
- ----------
* Indicates ownership which does not exceed 1.0%.
(1) Includes 440 shares held of record by the Company's 401(k) Plan as
custodian for the wife of Mr. Hollaway.
(2) Includes 4,640 shares held of record by the Company's 401(k) Plan as
custodian for Mr. Rudolph.
(3) Includes 34,990 shares held of record by the Charles and Emma Slavik
Investment Partnership, of which Mr. Slavik is general partner.
(4) Consists of 90,300 shares held of record by the Harrison Stafford
Investment Partnership, of which Mr. Stafford is general partner.
(5) Includes 410 shares held of record by a 401(k) Plan for the benefit
of Mr. Steelhammer.
(6) Includes 140,236 shares held by the Estate of Louis Tittizer, of
which Ms. Tittizer is executor.
(7) Includes 6,400 shares held of record by Mr. Zalman as custodian for
his minor children.
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PERFORMANCE GRAPH
The following Performance Graph compares the cumulative total
shareholder return on the Company's Common Stock for the period from November
12, 1998, when the Common Stock was first listed on the Nasdaq National Market,
to December 31, 1998, with the cumulative total return of the S&P 500 Total
Return Index and the Nasdaq Bank Index for the same period. Dividend
reinvestment has been assumed. The Performance Graph assumes $100 invested on
November 12, 1998 in the Company's Common Stock, the S&P 500 Total Return Index
and the Nasdaq Bank Index. The historical stock price performance for the
Company's stock shown on the graph below is not necessarily indicative of future
stock performance.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
11/12/98 12/31/98
------------ ------------
PRSP................. $ 100.00 $ 103.13
Nasdaq Bank Index.... 100.00 102.63
S&P 500.............. 100.00 110.18
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 (the "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.
12
<PAGE>
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 except
that Mr. Hollaway was late in filing one report covering one transaction on Form
4 to reflect changes in his beneficial ownership.
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP as the
independent auditors of the books and accounts of the Company for the year
ending December 31, 1999. Deloitte & Touche 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 Deloitte & Touche 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 Deloitte & Touche 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.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
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 Company's
principal executive offices not later than December 1, 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 must deliver the proposal to the Secretary of the Company not later
than the close of business on March 5, 2000.
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.
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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/ TRACY T. RUDOLPH
Tracy T. Rudolph
Chairman of the Board and President
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PROXY
PROSPERITY BANCSHARES, INC.
1999 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON TUESDAY, MAY 4, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The 1999 Annual Meeting of Shareholders of Prosperity Bancshares,
Inc. (the "Company") will be held at 1301 N. Mechanic, El Campo, Texas, on
Tuesday, May 4, 1999, beginning at 3:00 p.m. (local time). The undersigned
hereby acknowledges receipt of the related Notice of 1999 Annual Meeting of
Shareholders and Proxy Statement dated April 1, 1999 accompanying this proxy.
The undersigned hereby appoints Tracy T. Rudolph and David Zalman and
each of them, attorneys and agents, with full power of substitution, to vote as
proxy all shares of Common Stock, par value $1.00 per share, of the Company
owned of record by the undersigned 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, as may properly come
before such meeting or any adjournment thereof, including any matter presented
by a shareholder at such meeting for which advance notice was not received by
the Company in accordance with the Company's Bylaws.
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 2002 Annual Meeting of
Shareholders and until their successors are duly elected and qualified.
/ / FOR all nominees listed below (except as otherwise indicated*)
/ / WITHHOLD AUTHORITY for all nominees listed below
* Instruction: To withhold authority to vote for any nominee, draw
a line through the name of such nominee in the list below.
J. T. Herin Charles M. Slavik Harrison Stafford
<PAGE>
2. RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE 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 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 2002 Annual
Meeting of Shareholders and until their successors are duly elected and
qualified and FOR the ratification of the appointment of Deloitte & Touche 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 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.
_______________________________
Print Name
_______________________________
Signature of Shareholder
_______________________________
Print Name
_______________________________
Signature of Shareholder
Date: ___________________, 1999
