<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
AREA BANCSHARES CORPORATION
- --------------------------------------------------------------------------------
(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)(1) 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:
<PAGE> 2
AREA BANCSHARES CORPORATION
230 FREDERICA STREET
OWENSBORO, KY 42302
April 17, 1998
Dear Shareholder:
The annual meeting of shareholders will be held on May 18, 1998, at
11:00 A.M., local time, at the main office of Area Bancshares Corporation, 230
Frederica Street, Owensboro, Kentucky. The meeting will be held in the boardroom
of The Owensboro National Bank. The formal Notice of the Meeting and Proxy
Statement appear in the pages that follow.
Details on the items of business that will be discussed and voted on at
this year's meeting are included in this Proxy Statement.
I hope that you will be able to attend the annual meeting. However, if
you cannot attend in person, please sign and date the enclosed proxy and return
it promptly in the enclosed envelope to ensure that your shares are represented
at the annual meeting. If you later find that you may be present or for any
other reason desire to revoke your proxy, you may do so prior to the time the
presence of a quorum has been determined and declared.
On behalf of the Board of Directors and employees of Area Bancshares,
let me express our appreciation for your continued support and confidence.
Sincerely,
/s/ Thomas R. Brumley
- -------------------------------------
Thomas R. Brumley
President and Chief Executive Officer
<PAGE> 3
AREA BANCSHARES CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 18, 1998
To the Holders of Common Stock of Area Bancshares Corporation:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Area
Bancshares, (the "Corporation"), a Kentucky corporation, will be held at the
main office of Area Bancshares Corporation, 230 Frederica Street, Owensboro,
Kentucky, on May 18, 1998, at 11:00 A.M., Daylight Savings Time, in the
boardroom of The Owensboro National Bank, for the following purposes:
1) To elect thirteen directors to hold office until the next annual
election and until their successors shall be duly elected and
qualified;
2) To ratify the appointment of KPMG Peat Marwick LLP as corporate
auditors for the 1998 calendar year; and
3) To transact such other business as may properly come before the
meeting.
Only holders of common stock of record at the close of business on
April 3, 1998, will be entitled to vote at the meeting or any adjournment
thereof.
TO ENSURE YOUR REPRESENTATION AT THE MEETING, THE BOARD OF DIRECTORS OF
THE CORPORATION REQUESTS THAT YOU MARK, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED AND, IF YOU ARE
ABLE TO ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY
REVOKE OR WITHDRAW YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED.
By Order of the Board of Directors,
/s/ Thomas R. Brumley
- -------------------------------------
Thomas R. Brumley
President and Chief Executive Officer
April 17, 1998
<PAGE> 4
AREA BANCSHARES CORPORATION
230 Frederica Street
Owensboro, KY 42302
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Area Bancshares Corporation (the "Corporation") of
proxies to be voted at the annual meeting of shareholders to be held on May 18,
1998. Any shareholder giving a proxy has the right to revoke it by a written
notice delivered to the Secretary of the Corporation, P.O. Box 786, Owensboro,
Kentucky, 42302-0786, or in person at the meeting, prior to the time the proxy
is exercised. All proxies will be voted in accordance with the directions of the
shareholders and to the extent no directions are given, will be voted "for" the
nominees for directors.
This Proxy Statement and form of proxy are first being mailed to
shareholders commencing on or about April 17, 1998.
The Corporation will bear the entire cost of soliciting proxies.
Solicitation will be primarily by mail. Certain officers of the Corporation and
its subsidiaries may solicit proxies personally, by telephone or special letter,
but such persons will not be specially compensated for such services.
SHARES OUTSTANDING AND VOTING
Only shareholders of record at the close of business on April 3, 1998
are entitled to notice of, and to vote at, the annual meeting. As of April 3,
1998, there were issued and outstanding 15,630,802 shares of common stock. The
Corporation has no class of stock outstanding other than common stock. In order
to constitute a quorum for the Annual Meeting, the holders of 7,815,402 shares
must be present or represented by proxies. Under Kentucky law and the
Corporation's Articles of Incorporation and By-laws, the aggregate number of
votes entitled to be cast by all shareholders present in person or represented
by proxy at the Annual Meeting, whether those shareholders vote "for", "against"
or "abstain" from voting, and broker non-votes will be counted for purposes of
determining whether a quorum is present.
Each share of the common stock is entitled to one vote on all matters
presented to the shareholders with the exception of the election of directors.
In the election of directors, cumulative voting rules may apply. Under
cumulative voting, each shareholder is entitled to cast as many votes in the
aggregate as shall equal the number of shares of the common stock owned by him
or her multiplied by the number of directors to be elected. Each shareholder, or
his or her proxy, may cast all of his or her votes (as thus determined) for a
single nominee for director or may distribute them among two or more nominees,
at the shareholder's discretion. Shareholders desiring to vote shares
cumulatively are required to deliver written notice of such fact to the
President of the Corporation at its principal office not less than seventy-two
(72) hours prior to the time for the election, and failure of any shareholder to
give such notice shall constitute waiver of such shareholder's right; provided,
however, that if one or more shareholders shall give such notice, all
shareholders may vote cumulatively regardless of whether such shareholder timely
gave notice. As to the authority of the persons named as proxies in the
accompanying proxy card to cumulate votes, see the section entitled "Election of
Directors".
As of April 3, 1998, the trust departments of subsidiaries of the
Corporation held of record 1,807,611 shares of the Corporation's common stock in
a fiduciary capacity representing approximately 11.6 percent of the
Corporation's outstanding shares of common stock. With respect to 944,751 shares
(approximately 6.0 percent), the instrument creating the trust or fiduciary
relationship specifically directs the trustee to vote the shares and the shares
are expected to be voted "for" the proposals presented for consideration. The
remaining shares held by the trust departments will be voted at the direction of
the beneficial owners.
<PAGE> 5
The following table sets forth certain information as to those persons
believed by management to be beneficial owners of more than 5% of the
outstanding shares of the common stock of the Corporation as of April 3, 1998:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owners (1) Beneficial Ownership (2) Percent of Class
--------------------- ------------------------ ----------------
<S> <C> <C>
C. M. Gatton 4,295,209 27.48%
P.O. Box 1147
Bristol, TN 37620
</TABLE>
- -------------------------------------
(1) For ownership of shares attributed to Mr. Gatton, see footnote 5, page 4
herein.
(2) Information relating to beneficial ownership is based upon "beneficial
ownership" concepts set forth in rules promulgated under the Securities Act
of 1934, as amended. Under such rules, a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting
power", which includes the power to dispose or to direct the voting of such
security, or "investment power", which includes the power to dispose or to
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any security of which that person has the right to
acquire beneficial ownership within sixty (60) days. Under the rules, more
than one person may be deemed to be a beneficial owner of the same
securities, and a person may be deemed to be a beneficial owner of
securities as to which he or she has no beneficial interest. The shares of
the Corporation's common stock issuable upon exercise of outstanding
options held by a person are assumed to be outstanding for the purpose of
determining the percentage of shares beneficially owned by that person.
Under the Corporation's Articles of Incorporation and Bylaws and the
Kentucky Business Corporation Act, the ratification of the selection of the
Corporation's auditors, and in the absence of a shareholder request for
cumulative voting, the election of directors, will require an affirmative vote
of a majority of the shares of common stock entitled to vote on the proposal. If
cumulative voting with respect to the election of thirteen directors is required
by any shareholder, the thirteen nominees receiving the most votes cast for the
election of directors at the annual meeting will be elected.
BENEFICIAL OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS OF COMMON STOCK
OF THE CORPORATION
Set forth on the following three pages is information with respect to
shares of common stock of the Corporation beneficially owned as of April 3, 1998
by the current director-nominees, the executive officers named in the Summary
Compensation Table herein, and all director-nominees and executive officers of
the Corporation as a group. Unless otherwise noted, the named person has sole
voting and investment powers with respect to the reported shares.
2
<PAGE> 6
BENEFICIAL OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS OF COMMON STOCK
OF THE CORPORATION (CONTINUED)
<TABLE>
<CAPTION>
Name of Director Amount and Nature of Percent
or Executive Officer Beneficial Ownership (1) of Class
- -------------------- ------------------------ --------
<S> <C> <C>
Anthony G. Bittel (2) 511,518 3.27%
Samuel A. B. Boone (3) 191,736 1.23%
Thomas R. Brumley (4) 130,699 *
President and CEO
Cecile W. Garmon 150 *
C.M. Gatton (5) 4,295,209 27.48%
Gary H. Latham (6) 350,943 2.25%
Raymond C. McKinney (7) 133,697 *
John S. Penn (8) 152,275 *
Executive Vice President
Allan R. Rhodes (9) 33,019 *
David W. Smith, Jr. (10) 146,402 *
William H. Thompson (11) 172,425 1.10%
Don Vitale (12) 39,714 *
Pollard White (13) 11,250 *
Cy M. Williamson (14) 114,595 *
Director Emeritus
Jack H. Brown (15) 98,970 *
Senior Vice President-
Chief Financial Officer
Donald A. Leibee (16) 6,350 *
Senior Vice President-
Loan Administration
John A. Ray (17) 10,383 *
Treasurer
------------------- ------------
All directors and executive 6,399,335 40.94%
officers as a group (17 persons)
</TABLE>
- -----------------------------------
* Represents less than 1.00% of the Corporation's common stock.
3
<PAGE> 7
BENEFICIAL OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS OF COMMON STOCK
OF THE CORPORATION (CONTINUED)
(1) Information relating to beneficial ownership is based upon "beneficial
ownership" concepts set forth in rules promulgated under the Securities Act
of 1934, as amended. Under such rules, a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting
power", which includes the power to dispose or to direct the voting of such
security, or "investment power", which includes the power to dispose or to
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any security of which that person has the right to
acquire beneficial ownership within sixty (60) days. Under the rules, more
than one person may be deemed to be a beneficial owner of the same
securities, and a person may be deemed to be a beneficial owner of
securities as to which he or she has no beneficial interest. The shares of
the Corporation's common stock issuable upon exercise of outstanding
options held by a person are assumed to be outstanding for the purpose of
determining the percentage of shares beneficially owned by that person.
(2) Shares represented include 185,618 shares held by A.G. Bittel Trust, 50,000
shares held by M.A. Bittel Trust, 241,000 shares held by Bittel Investment,
Inc. and 251,800 shares held by Bittel Family Limited Partnership.
(3) Shares represented include 59,950 shares held by Boone Enterprises #8 and
63,147 shares held by Boone Enterprises #7.
(4) Shares represented include 3,970 shares held by T.R. Brumley IRA and 3,897
shares held by the Corporation's 401(k) plan for the benefit of Mr.
Brumley.
(5) Shares represented include 480,000 shares held by C.M. Gatton Foundation,
20,508 shares held in custody for the benefit of Mr. Gatton, 18,612 shares
held by the Customer One Profit Sharing Plan for the benefit of Mr. Gatton
and 483 shares held by Mr. Gatton's spouse.
(6) Shares represented include 17,760 shares held by Mr. Latham's spouse.
(7) Shares represented include 73,272 shares held by Mr. McKinney's spouse.
(8) Shares represented include 2,773 shares held by the Corporation's 401(k)
plan for the benefit of Mr. Penn and options to purchase 91,305 shares
which are exercisable within 60 days.
(9) Shares represented include 7,344 shares held in custody for the benefit of
Mr. Rhodes and 25,675 shares held by A. Rhodes IRA.
(10) Shares represented include 1,282 shares held by Mr. Smith's spouse, 13,722
shares held by Wyndall's Enterprises, of which he is President, and 13,722
shares held by Shawnee Park Shopping Center.
(11) Shares represented include 160,500 shares held by W.H. Thompson Trust and
11,925 shares held by Mr. Thompson's spouse.
(12) Shares represented include 22,263 shares held by D. Vitale Trust, 2,739
shares held by Manchester Capital, LLC and 14,712 held in trust for the
benefit of various members of Mr. Vitale's family.
4
<PAGE> 8
BENEFICIAL OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS OF COMMON STOCK
OF THE CORPORATION (CONTINUED)
(13) Shares represented include 5,575 shares held in a custody account for
the benefit of Mr. White and 5,575 shares held in a custody account
for the benefit of Mr. White's spouse.
(14) Mr. Williamson is standing for election as a Director Emeritus.
Accordingly, he is not considered a Director Nominee under applicable
legal requirements.
(15) Shares represented include 8,263 shares held by J. Brown IRA, 2,987
shares held by the Corporation's 401(k) plan for the benefit of Mr.
Brown and options to purchase 21,914 shares which are exercisable
within 60 days.
(16) Shares represented include 2,328 shares held by D. Leibee IRA and
3,113 shares held by the Corporation's 401(k) plan for the benefit of
Mr. Leibee.
(17) Shares represented include 3,060 shares held by J. Ray IRA and 2,261
shares held by the Corporation's 401(k) plan for the benefit of Mr.
Ray.
COMPLIANCE WITH SECTION 16 (A) OF THE SECURITIES ACT OF 1934
Based solely on its review of the copies of such forms received by it
or representations from such persons that no Form 5's were required, the
Corporation believes that all filing requirements applicable to its officers,
directors and greater than ten percent (10%) beneficial owners were complied
with in 1997 with the following exceptions: failure to file the required Form 4
on behalf of Mr. Rhodes covering two transactions; on behalf of Mr. Smith
covering one transaction; on behalf of Mr. White covering one transaction; and
on behalf of Mr. Williamson covering one transaction. The preceding exceptions
were corrected as soon as they were discovered.
PROPOSAL ONE: ELECTION OF DIRECTORS
Among items to be acted upon at the annual meeting of shareholders is
the election of thirteen directors to the Board of Directors of the Corporation.
Each of the persons elected will serve a term in office of one year and until
his or her successor is duly elected and qualified. All nominees for directors
are currently either directors or advisory directors of the Corporation.
The Corporation's Articles of Incorporation and By-laws provide that
the Board shall consist of not less than five nor more than fifteen directors.
As permitted in the By-laws, effective as of May 18, 1998, the Board has fixed
the number of directors at thirteen.
Absent a contrary direction by the shareholder, the enclosed proxy will
be voted for the election of the nominees for directors listed on the following
page. In the event any nominee is unable or for good reason declines to serve as
a director at the time of the annual meeting, the proxy will be voted for such
substitute nominee, if any, as may be selected by the Board of Directors of the
Corporation. The management of the Corporation has no reason to believe that the
persons named will be unable to serve or will decline to serve if elected.
5
<PAGE> 9
NOMINEES FOR ELECTION TO THE BOARD (1)
<TABLE>
<CAPTION>
Position with Service
Name Age the Corporation Since (2)
- ----- --- --------------- ---------
<S> <C> <C> <C>
Anthony G. Bittel 81 Director 1976
Samuel A. B. Boone 37 Director 1996
Thomas R. Brumley 59 President and CEO 1982
Cecile W. Garmon 59 Director-Advisory 1997
C. M. Gatton 66 Director and Chairman 1976
Gary H. Latham 66 Director 1986
Raymond C. McKinney 65 Director and Vice Chairman 1986
John S. Penn 46 Executive Vice President 1987
Allan R. Rhodes 74 Director 1984
David W. Smith, Jr. 55 Director 1980
William H. Thompson 82 Director 1976
Don Vitale 59 Director-Advisory 1997
Pollard White 77 Director 1986
Cy M. Williamson 76 Director Emeritus 1986
</TABLE>
- -------------------------------------
(1) All of the Corporation's directors except Mr. Williamson serve for a one
year term or until their successors have been elected. Mr. Williamson will
act as Director Emeritus until his resignation or death.
(2) Dates reflect service with the Corporation or one of its subsidiaries.
BUSINESS EXPERIENCE OF DIRECTORS
Set forth below and on the following page is information concerning all
of the director-nominees and the director emeritus of the Corporation, including
their positions held with Alliance Bank, FSB ("Alliance"), Bowling Green Bank
and Trust Company, N.A. ("Bowling Green"), Citizens Deposit Bank ("Citizens"),
First City Bank and Trust Company ("First City"), First & Peoples Bank ("First &
Peoples"), HNB Bank, N.A. ("HNB"), Jefferson Banking Company ("Jefferson"), The
New Farmers National Bank of Glasgow ("New Farmers"), The Owensboro National
Bank ("Owensboro National"), Southern Deposit Bank ("Southern"), The Vine Street
Trust Company ("Vine Street") and Vine Street Financial, Inc. ("Vine Street
Financial").
Anthony G. Bittel is President of Anthony Bittel Farms and Bittel
Investments, Inc., and serves as President of Big Independent Tobacco Warehouse
and General Manager of Owensboro Tobacco Warehouse Company. He also serves as a
director of Owensboro National.
Samuel A. B. Boone has served as President of the Lexington Quarry
Company since 1990 and served as General Manager of Wimbledon Farm in Lexington
from 1982 to 1990. He is a former director of Cardinal Bancshares, Inc. and
serves as a director of First & Peoples.
Thomas R. Brumley has served as President and Chief Executive Officer
of the Corporation since 1990. He also serves as a director of Alliance, Bowling
Green, Citizens, First City, First & Peoples, HNB, Jefferson, New Farmers,
Owensboro National, Southern and Vine Street.
Cecile W. Garmon is an Associate Professor in the Department of
Communications and Broadcasting at Western Kentucky University. She also serves
as a director of New Farmers.
6
<PAGE> 10
BUSINESS EXPERIENCE OF DIRECTORS (CONTINUED)
C. M. Gatton has served as Chairman of the Corporation since 1976. He
also serves as President of Bill Gatton Chevrolet-Cadillac, Director and
President of Arrowhead Acura, Inc., Chairman and President of Bill Gatton
Imports, Inc., Chairman and President of G. W. Automotive, Inc., President and
Director of Courtesy Chevrolet-Cadillac, Inc., Chairman and President of Saturn
of Huntsville, Inc., all of which are automobile dealerships. In addition, he
serves as Chairman and President of C. Gatton, Inc., Chairman and President of
Bill Gatton, Inc., Chairman of Adnoh, Inc., President of Universal Acceptance
Corporation, which furnishes credit to automobile purchasers, and Director of
Morrison Molded Fiber Glass Company. He also serves as a director of Alliance,
Bowling Green, First City, First & Peoples, HNB, Jefferson, New Farmers,
Owensboro National, Southern and Vine Street.
Gary H. Latham is currently retired. Prior to retirement, he was
Director and CEO of Western State Hospital, a position he held from 1960 to
1991. He also serves as a director of First City.
Raymond C. McKinney has been President of R. C. McKinney, Inc. since
1957. Also he has served as Vice Chairman of the Corporation since 1986. He also
serves as a director of First City.
John S. Penn served as President and Chief Executive Officer of
Cardinal Bancshares, Inc. from 1996 to 1997 and as its President and Chief
Operating Officer from 1987 to 1996. He also serves as a director of Vine Street
Financial.
Allan R. Rhodes has served as Chairman of Allan Rhodes, Inc., an
automobile dealership in Paducah, Kentucky since 1959. He also serves as an
advisory director of Alliance, Bowling Green, Citizens, First City, First &
Peoples, HNB, Jefferson, New Farmers, Owensboro National, Southern and Vine
Street.
David W. Smith, Jr., has served as President of Wyndall's Enterprises,
Inc., a retail grocery chain, since 1980. He also serves as a director of
Owensboro National.
William H. Thompson is a semi-retired real estate developer. He
currently serves as President of W. H. Thompson Trust Acquisition, Inc., a real
estate development company. He also serves as Director Emeritus of Owensboro
National.
Don Vitale is currently Chairman and President of Manchester Capital, a
private investment company. Prior to establishing Manchester Capital, he was a
principal organizer and President of DESA International. He also serves as a
director of Bowling Green.
Pollard White has practiced law since 1947. He is a member of the law
firm of White, White, Askew and Crenshaw. He also serves as Director Emeritus of
First City.
Cy M. Williamson served as Chairman of Acme-Goodwill Finance,
a consumer finance company, from 1989 to 1997. He was formerly Chairman of First
City. He also serves as Senior Chairman Emeritus of First City.
The Board of Directors has no reason to believe that any of the
nominees will be unavailable to serve as director. If any nominee should become
unavailable before the annual meeting, the persons named in the enclosed proxy
card, or their substitutes, or a majority of them, reserve the right to vote for
a substitute nominee selected by the Board of Directors. In addition, if any
shareholder or shareholders shall vote shares cumulatively or otherwise for the
election of a director or directors other than the nominees named above, or
substitute nominees, or for less than all of them, the persons named in the
enclosed proxy card, or their substitutes, or a majority of them, shall have the
right, in their discretion, to vote cumulatively for some number less than all
of the nominees named above or any substitute nominees, and for such of the
persons nominated as they may choose.
7
<PAGE> 11
MEETINGS AND COMMITTEES
During 1997, the board of directors of the Corporation held twelve
regular meetings and three special meetings. During 1997 the Audit Committee met
four times.
Each of the directors attended at least 75%, except for Raymond C.
McKinney who attended 66.6% of the aggregate of (a) the total number of meetings
of the Board of Directors held during the period for which he was a director,
and (b) the total number of meetings held by all committees of the Board on
which he served.
The members of the Audit Committee are Cecile W. Garmon, Gary H.
Latham, Allan R. Rhodes, David W. Smith, Jr., William H. Thompson and Don
Vitale. The Committee recommends to the Board the engagement of independent
auditors; reviews with independent auditors the scope and results of the audit
engagement; reviews the scope, frequency, and results of internal audits and
examinations; reviews the adequacy of the Corporation's system of internal
accounting controls; and reviews the examination reports of the Corporation and
its subsidiaries.
The Corporation has no standing compensation committee. All decisions
regarding executive compensation are made by the full Board of Directors, as
hereinafter discussed.
EXECUTIVE COMPENSATION
The table on the following page contains information concerning
compensation paid by the Corporation and its subsidiaries to, or on behalf of,
the Corporation's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Corporation during 1997 whose compensation
exceeded $100,000 for the fiscal years ended December 31, 1997, 1996, and 1995.
The policies and practices of the Corporation pursuant to which the compensation
set forth in the Summary Compensation Table was paid or awarded is described
under the section, "Report of the Board of Directors on Executive Compensation".
8
<PAGE> 12
EXECUTIVE COMPENSATION (CONTINUED)
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Other Restricted Securities All
Annual Stock Underlying Other
Name and Compen- Awards Options/ LTIP Compensation
Principal Position Year Salary Bonus sation (1) ($) SARs (#) Payouts ($) (2)
- ------------------ ---- ------ ----- ---------- -------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas R. Brumley 1997 228,000 4,750
President and CEO 1996 196,000 20,000 4,750
1995 180,000 4,620
John S. Penn 1997 175,000 7,000
Executive Vice 1996 142,040 5,682
President 1995 142,040 5,682
Jack H. Brown 1997 122,000 2,739 4,880
Chief Financial Officer 1996 109,400 5,478 4,376
1995 109,400 4,376
John A. Ray 1997 109,100 8,041 95,445(3) 4,100
Treasurer 1996 99,999 3,500
1995 98,365 730 3,468
Donald A. Leibee 1997 106,000 8,041 95,445(3) 3,793
Senior Vice President- 1996 96,000 3,360
Loan Administration 1995 94,941 28,350
</TABLE>
- --------------------
(1) The dollar value of perquisites and other personal benefits received
by executive officers did not exceed the lower of $50,000 or ten
percent of the total amount of salary and bonus for each year.
(2) Represents amounts contributed to the 401(k) plan on behalf of
executive officers except Mr. Leibee's 1995 amount which represents
profit from the sale of stock received upon exercise of qualified
incentive stock options held less than one year and $3,323 contributed
to the 401(k) plan on behalf of Mr. Leibee.
(3) The value of the restricted stock awards as of December 31, 1997 was
$109,080.
9
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to stock option
grants for the named executive officers in the Summary Compensation Table who
received options in the last fiscal year:
<TABLE>
<CAPTION>
% of Total
Number Options Exercise Potential Realizable
of Options Granted to Price Expiration Value (2)
Name Granted (1) Employees (Per Share) Date At 5% At 10%
- ---- ----------- --------- ----------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Jack H. Brown 2,739 6.78% $16.19 1/17/07 $27,883 $70,667
</TABLE>
- -------------------------
(1) Options were granted at an exercise price of 100% of fair market
value. The options granted to Mr. Brown were on January 17, 1997 and
became exercisable on May 1, 1997.
(2) Potential realizable value of assumed annual rate of stock price
appreciation for the option term.
RESTRICTED STOCK GRANTS IN LAST FISCAL YEAR
During 1997 the Corporation granted restricted stock in the amount of
4,545 shares each to Donald A. Leibee and John A. Ray. These shares were granted
under the Corporation's restricted stock award plan.
OPTIONS EXERCISED AND OPTION HOLDINGS
The following table contains option exercises in the last fiscal year
and year-end option values for the named executive officers in the Summary
Compensation Table who exercised options or had options outstanding as of
December 31, 1997:
<TABLE>
<CAPTION>
Shares
Acquired
on Number of Shares Underlying Value of In-the-Money
Exercise Value Options at Year-end Options at Year-end
Name (Number) Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ---- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
John S. Penn -- -- 91,305/0 $2,024,652/0
Jack H. Brown -- -- 21,914/0 $286,258/0
</TABLE>
10
<PAGE> 14
PENSION PLAN
The Corporation maintains a non-contributory defined pension plan
covering substantially all employees who satisfy certain age and service
requirements. The benefits are generally based on years of service and average
compensation, which compensation is generally computed using the five
consecutive years prior to retirement that yield the highest average.
The following table sets forth the annual benefit payable based on
compensation and years of service:
<TABLE>
<CAPTION>
Years of Service
Compensation 15 20 25 30 35
------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$100,000 $16,868 $23,490 $30,113 $36,735 $43,358
125,000 21,743 30,240 38,738 47,235 55,733
150,000 26,618 36,990 47,363 57,735 68,108
175,000 26,618 36,990 47,363 57,735 68,108
</TABLE>
Years of credited service, to the nearest year and current compensation
covered by the pension plan (total salary, bonus and any other incentive
compensation) for the named executive officers are as follows:
<TABLE>
<CAPTION>
Current Compensation
Executive Officer Years of Service Covered by the Pension Plan
- ----------------- ---------------- ---------------------------
<S> <C> <C>
Thomas R. Brumley 16 $150,000
John S. Penn 11 150,000
Jack H. Brown 11 122,000
Donald A. Leibee 14 106,000
John A. Ray 15 109,100
</TABLE>
Compensation for plan purposes means total cash compensation, including
overtime pay and bonuses. A participant's annual compensation for plan purposes
is limited to $150,000 as required under Internal Revenue Code Section
401(a)(17).
The normal retirement benefit, 1/12th of which is payable monthly for
the life of the participant, is equal to the sum of the following:
- 0.65% of average earnings multiplied by the participant's years
of benefit service, plus
- 0.20% of average earnings multiplied by the participant's years of
benefit service in excess of 15 years, but not more than 35 years,
plus
- 0.65% of average earnings in excess of the then current covered
compensation for the participant, multiplied by the participant's
years of benefit service not in excess of 35 years.
"Average earnings" is the average annual compensation of a participant
for the five consecutive plan years which produce the highest average out of the
final ten plan years of service. "Covered compensation" is the average of the
taxable wage bases for the 35 years ending with the year the participant attains
Social Security retirement age, rounded, as permitted by the IRS. Benefits
listed in the pension plan table are not subject to any deduction for Social
Security or other offset amounts.
11
<PAGE> 15
DEFINED CONTRIBUTION PLAN
The Corporation currently provides a defined contribution Profit
Sharing Trust with an Internal Revenue Code 401(k) option ("401(k) Plan"). Prior
to 1995, the Corporation provided a straight profit sharing plan without 401(k)
options. Under the provisions of the 401(k) Plan, employees with one year of
service may become participants with all contributions to the plan by the
employee to be 100% vested.
Contributions to the 401(k) Plan for the benefit of the participants
can be made in two ways. First, the participant can enter into a Salary
Reduction Agreement whereby up to 15% of the employee's salary will be
contributed to the 401(k) Plan. Secondly, an employee contribution will be made
to the plan equal to 50% of the employee's contribution to the 401(k) Plan to a
maximum contribution of 3.5% of the participant's salary. For purposes of the
401(k) Plan, salary includes regular base pay only, and does not include any
other forms of compensation such as overtime, taxable fringe benefits or
executive incentive compensation. The contributions made for the executive
officers named in the Summary Compensation Table for the years 1997, 1996 and
1995, respectively, are as follows: Mr. Brumley, $4,750.00, $4,750.00 and
$4,620.00; Mr. Penn, $7,000.00, $5,682.00 and $5,682.00; Mr. Brown, $4,880.00,
$4,376.00 and $4,376.00; Mr. Ray, $4,100.00, $3,500.00 and $3,468.00; and Mr.
Leibee, $3,793.00, $3,360.00 and $3,323.00.
COMPENSATION OF DIRECTORS
For the year ended December 31, 1997, each non-management director
received a fee of $500.00 for each board meeting attended and $100.00 for each
committee meeting attended. The board fee will remain unchanged for 1998.
EXECUTIVE OFFICERS
Information regarding the current executive officers of the
Corporation, including their names, ages, positions with the Corporation, and a
brief description of their business experience during the past five years, is
presented below and on the following page. Executive officers are elected
annually by the Board of Directors.
Thomas R. Brumley, age 59, has served as President and Chief Executive
Officer of the Corporation since 1990. He served as Executive Vice President of
the Corporation from 1983 to 1986, and as President and CEO of Owensboro
National from 1983 to 1990.
Jack H. Brown, age 48, has served as Senior Vice President, Chief
Financial Officer of the Corporation since 1997. He served as Chief Financial
Officer of Cardinal Bancshares, Inc. from 1988 to 1997.
Edward F. Johnson, age 62, has served as Senior Vice President of the
Corporation in charge of operations since 1987. He also serves as First Senior
Vice President of Owensboro National.
Donald A. Leibee, age 53, has served as Senior Vice President of the
Corporation in charge of loan administration since 1990. He was First Senior
Vice President and Chief Lending Officer of Owensboro National from 1984 to
1990.
John S. Penn, age 46, has served as Executive Vice President of the
Corporation since 1997. Prior to that, he served as President and Chief
Executive Officer of Cardinal Bancshares, Inc. from 1996 to 1997 and as its
President and Chief Operating Officer from 1987 to 1996.
12
<PAGE> 16
EXECUTIVE OFFICERS (CONTINUED)
John A. Ray, age 42, has served as Treasurer of the Corporation since
February 1998. He is currently President and Chief Executive Officer of
Owensboro National. He previously held the following positions with the
Corporation or its subsidiaries: Senior Vice President and Chief Financial
Officer of the Corporation from 1994 to 1997; First Senior Vice President of
Finance for Owensboro National from 1993 to 1994; Executive Vice President and
Chief Operating Officer for First Federal Savings and Loan Association from 1992
to 1993 and First Senior Vice President of Finance for Owensboro National from
1985 to 1992.
Timothy O. Shelburne, age 41, has served as General Counsel of the
Corporation since 1995. He previously held the position of Vice President and
Compliance Officer with Owensboro National from August 1993 to December 1994.
Prior to joining Owensboro National, he was a partner in the law firm of
Holbrook, Wible, Sullivan and Mountjoy. Mr. Shelburne is the nephew by marriage
of Thomas R. Brumley, the Corporation's President and Chief Executive Officer.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Corporation establishes the general
compensation policies of the Corporation, establishes the compensation plans and
specific compensation levels for executive officers and administers the
Corporation's Executive Incentive Compensation Program, and awards stock-based
compensation to executive officers and employees of the Corporation. Thomas R.
Brumley, President and CEO of the Corporation, participates in compensation
discussions and decisions affecting other executive officers of the Corporation.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The entire Board acts as the Compensation Committee for the
Corporation's executive officers and the affiliate banks' chief executive
officers.
Base salaries are adjusted annually within a current four (4) percent
guideline which is augmented by incentive bonus program for performance beyond
expected goals established for (a) net overhead (b) growth in average assets (c)
asset quality (d) net loan losses (e) return on equity-bank and (f) return on
equity-Corporation.
The Incentive Bonus Program is subject to a number of limitations
enumerated as follows:
1. Corporation executive officers were excluded from the 1995 Incentive Bonus
Program.
2. A bonus limitation of 7 percent of net income including accrual of bonus
and 401(k) contribution.
3. A participation limitation of:
(a) Superior-Not more than 20% of total participants.
(b) Superior and Excellent-Not more than 50% of total participants.
(c) Above Average-Not more than 40% of total participants.
(d) Average-Must have at least 10% of total participants.
4. A participation schedule limitation of:
(a) Superior-Receive 60% of pool fund or a range of 17-32% of salary,
whichever is less.
(b) Excellent-Receive 30% of pool fund or a range of 9-16% of salary.
(c) Above Average-Receive 10% of pool fund or a range of 3-8% of salary.
(d) Average or Below-May receive $600 or 1/2 of lowest bonus in Above
Average category, whichever is less.
13
<PAGE> 17
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION (CONTINUED)
The Committee seeks to provide compensation opportunities that support
the ability to attract and retain competent officers who have the ability to
further the long-term goals of the Corporation. To this extent, a program of
limited stock options and restricted stock grants is used. Stock options and
restricted stock grants are limited to the chief executive officer of affiliate
banks or subsidiaries and executive officers of the Corporation. The Committee
determines the amount of the stock options or restricted stock grants according
to the person's responsibility and impact within the Corporation. All stock
options are granted at fair market value and are exercisable in accordance with
the terms of the Corporation's Stock Option Plan.
1997 COMPENSATION FOR THE PRESIDENT & CEO
The Board reviewed the compensation package for CEOs at peer
institutions ($1 billion to $2 billion in size) to establish a competitive view
of executive compensation. The Board then considered the Corporation's overall
performance, record for increasing shareholder value, success in meeting
strategic objectives and leadership. These factors, in conjunction with the
Corporation's financial results, determined the CEO's base salary for 1997.
Mr. Brumley did not receive an incentive bonus during 1997. Future
incentive compensation is determined on a sliding scale basis directly related
to the percentage of increase in earnings per share. If there is no increase in
earnings per share, no incentive compensation will be paid.
THE BOARD OF DIRECTORS OF AREA BANCSHARES CORPORATION:
C. M. Gatton (Chairman) John S. Penn
Anthony G. Bittel Allan R. Rhodes
Samuel A. B. Boone David W. Smith, Jr.
Thomas R. Brumley William H. Thompson
Cecile W.Garmon Don Vitale
Gary H. Latham Pollard White
Raymond C. McKinney Cy M. Williamson, Director Emeritus
COMPARATIVE STOCK PERFORMANCE
The Performance Graph set forth on the following page compares the
cumulative total shareholder return on Area Bancshares' common stock from June
30, 1995 through December 31, 1997 with the cumulative total return on the
NASDAQ Market Value Index ("Broad Market Index") and the Peer Group Industry
Index ("Industry Index") as provided by the University of Chicago Graduate
School of Business, Center for Research in Security Prices using the NASDAQ Bank
Stock Index. The cumulative total shareholder return computations set forth in
the Performance Graph assume the investment of $100 in Area Bancshares' common
stock, the Broad Market Index and the Industry Index on June 30, 1995 with the
reinvestment of all dividends.
14
<PAGE> 18
COMPARISON OF CUMULATIVE TOTAL RETURN OF AREA BANCSHARES,
INDUSTRY INDEX AND BROAD MARKET INDEX
FINANCIAL PERFORMANCE
<TABLE>
<CAPTION>
6/95 9/95 12/95 3/96 6/96 9/96 12/96 3/97 6/97 9/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Area 100.0 98.1 94.0 98.4 115.3 109.1 129.3 135.8 145.5 123.5 153.3
NASDAQ 100.0 112.0 113.4 118.7 128.4 132.9 139.5 131.9 156.1 182.5 171.2
Industry Index 100.0 112.9 123.2 128.0 130.2 144.0 162.7 174.8 203.5 239.9 274.8
</TABLE>
Prior to January 2, 1996 the common stock of the Corporation was not
registered on any exchange and was not traded on the over-the-counter market.
Sporadic sales of such shares occurred from time to time. Additionally, there
was no established public market for the stock. Accordingly, the volume of
trading often times was insufficient to establish a meaningful market price.
Historical prices during 1995 represent actual transactions based upon
information furnished to the Corporation by one or more of the parties involved
in certain privately negotiated purchases and sales and may not be
representative of all trades during the time periods listed. No attempt has been
made by the Corporation to verify the accuracy of the sales information
furnished to it. As a result, any prior history of quotations does not
necessarily reflect the price that would be paid for the shares in a liquid
market.
On December 7, 1995 the Corporation received approval for its common
stock to be listed on the NASDAQ National Market and trading commenced January
2, 1996. The market price used in the Performance Graph for dates after January
2, 1996, represents market trades on the NASDAQ market system.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
The Corporation has no employment or change in control agreements with
any of its executive officers.
TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Corporation are customers
of subsidiaries of the Corporation and have had and expect to have business and
banking transactions with such subsidiaries in the ordinary course of business.
In addition, some of the executive officers and directors of the Corporation are
also officers, directors or principal shareholders of corporations which are
customers of subsidiaries of the Corporation and which have had and expect to
have business and banking transactions with the Corporation in the ordinary
course of business. All such banking transactions were made in the ordinary
course of business, were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons and, in the opinion of management of the
Corporation and its subsidiaries, did not involve more than normal risk of
collectibility or present other unfavorable or unusual features.
15
<PAGE> 19
PROPOSAL TWO: INDEPENDENT PUBLIC ACCOUNTANTS
For the fiscal year ended December 31, 1997, the accounting firm of
KPMG Peat Marwick LLP served as the Corporation's independent public accountants
and auditors. The selection of the Corporation's independent public accountants
is not required to be submitted to the vote of shareholders, but the Board
believes the shareholders should have the opportunity to ratify the Board's
selection of KPMG Peat Marwick LLP. A representative from the firm of KPMG Peat
Marwick LLP is expected to be present at the annual meeting and will be
available to make a statement should he or she desire to do so, and respond to
questions of shareholders.
ANNUAL REPORT
Upon written request, the Corporation will provide without charge to
each shareholder, a copy of the Corporation's Annual Report on Form 10-K which
is required to be filed with the Securities and Exchange Commission for the year
ended December 31, 1997. Address all requests to:
Secretary
Area Bancshares Corporation
P.O. Box 786
Owensboro, Kentucky 42302-0786
SHAREHOLDERS' PROPOSALS AND OTHER MATTERS
Proposals by shareholders to be presented at the 1999 Annual Meeting of
Shareholders must be received by the President of the Corporation at its
principal office no later than November 1, 1998 for inclusion in the 1999 Proxy
Statement and form of proxy relating to that meeting.
The Board of Directors of the Corporation does not know of any matters
for action by shareholders at the annual meeting other than the matters
described in the notice. However, the enclosed Proxy will confer discretionary
authority with respect to any other matters which may properly come before the
meeting.
It is important that proxies be returned promptly. Shareholders,
whether or not they expect to attend in person, are requested to return their
Proxies in order that a quorum may be assured. Return may be made in the
enclosed envelope, to which no postage need be affixed.
By Order of the Board of Directors
/s/ Thomas R. Brumley
-------------------------------------
Thomas R. Brumley
President and Chief Executive Officer
Owensboro, Kentucky
April 17, 1998
16
<PAGE> 20
Appendix A
AREA BANCSHARES CORPORATION
230 Frederica Street, Owensboro, Kentucky 42301
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 18, 1998
The Board of Directors recommends a vote FOR Items 1 and 2.
The undersigned hereby appoints Raymond C. McKinney and David W. Smith, and each
of them, or their designees, each with full power of substitution, as lawful
proxies to represent and vote at the annual meeting of the stockholders of the
Company to be held on Monday, May 18, 1998, commencing at 11:00 A.M. Daylight
Savings Time on that day, and at any adjournment or adjournments thereof, as
fully and with the same effect as the undersigned might or could do if
personally present, with respect to the following matters and, in their
discretion upon any other matters which may properly come before the meeting:
1. Election of (13) directors to serve for a term of 1 year ending in 1999.
The nominees are: Anthony G. Bittel, Sammuel A.B. Boone, Thomas R. Brumley,
C.M. Gatton, Cecille Garmon, Gary Latham, Raymond C. McKinney, Jr., John S.
Penn, Allan R. Rhodes, David W. Smith, Jr., William H. Thompson, Don
Vitale, and Pollard White.
<TABLE>
<S> <C> <C>
[ ] FOR all nominees listed. [ ] WITHHOLD AUTHORITY [ ] FOR all nominees EXCEPT
to vote for all nominees listed. Nominees written in space
below.
</TABLE>
- --------------------------------------------------------------------------------
1. Ratification of the appointment of KPMG Peat Marwick LLP as independent
accountants.
[ ] FOR. [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES IN PROPOSAL 1 AND PROPOSAL 2.
Either of said proxies present and acting at said meeting at any adjournment or
adjournments thereof shall have and may exercise all of the powers of all said
proxies. The undersigned hereby ratifies and confirms all that said proxies, or
either of them or their substitutes, may lawfully do or cause to be done by
virtue hereof, and acknowledges receipt of the notice of said meeting and the
Proxy Statement accompanying it.
Dated , 1998
------------------------
-------------------------------------------
-------------------------------------------
Please insert date of signing. Sign exactly
as name appears at left. If signing as
attorney, administrator, executor, trustee,
or guardian, give full title as such.
