<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
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
[X] Definitive Proxy Statement only (as permitted by Rule 14a-6(a)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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 42301
April 16, 1999
Dear Shareholder:
The annual meeting of shareholders will be held on May 17, 1999, at
11:00 A.M., Central Daylight Savings 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 17, 1999
To the Holders of Common Stock of Area Bancshares Corporation:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Area
Bancshares Corporation, (the "Corporation"), a Kentucky corporation, will be
held at the main office of Area Bancshares Corporation, 230 Frederica Street,
Owensboro, Kentucky, on May 17, 1999, at 11:00 A.M., Central Daylight Savings
Time, in the boardroom of The Owensboro National Bank, for the following
purposes:
1) To elect fifteen 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 LLP as corporate auditors
for the 1999 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
March 26, 1999, 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 16, 1999
<PAGE> 4
AREA BANCSHARES CORPORATION
230 Frederica Street
Owensboro, KY 42301
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 17,
1999. Any shareholder giving a proxy has the right to revoke it by a written
notice delivered to the Corporation's Secretary, P.O. Box 786, Owensboro,
Kentucky, 42302-0786, or delivered to the Corporation's Secretary 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. To the extent no
directions are given, proxies 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 16, 1999.
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 March 26, 1999
are entitled to notice of, and to vote at, the annual meeting. As of March 26,
1999, there were issued and outstanding 16,972,909 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 8,486,455 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 gave
timely 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".
<PAGE> 5
As of March 26, 1999, the trust departments of subsidiaries of the
Corporation held of record 1,999,772 shares of the Corporation's common stock in
a fiduciary capacity representing approximately 11.8 percent of the
Corporation's outstanding shares of common stock. With respect to 1,083,541
shares (approximately 6.4 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.
Under the Corporation's Articles of Incorporation and By-laws 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 the 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 fifteen directors is required
by any shareholder, the fifteen nominees receiving the most votes cast for the
election of directors at the annual meeting will be elected.
PRINCIPAL SHAREHOLDERS
The following table lists the persons whom, to our best knowledge,
beneficially owned 5% or more of the Corporation's outstanding shares of common
stock as of March 26, 1999. According to rules adopted by the Securities and
Exchange Commission, a "beneficial owner" of securities has or shares the power
to vote the securities or to direct their investment. Unless otherwise
indicated, the person listed is the record owner of, and has sole voting and
investment power with respect to his shares.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owners Beneficial Ownership (1) Percent of Class
------------------ ------------------------ ----------------
<S> <C> <C>
C. M. Gatton 4,300,209 25.20%
P.O. Box 1147
Bristol, TN 37620
</TABLE>
- --------------------------
(1) 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, 5,000 shares held by the C. M. Gatton IRA
and 483 shares held by Mr. Gatton's spouse.
STOCK OWNED BY MANAGEMENT
The following table lists the number and percentage ownership of shares
of common stock beneficially owned by each nominee to serve as a director of the
Corporation, each executive officer named in the Summary Compensation Table
contained elsewhere in this Proxy Statement and all directors and executive
officers as a group as of March 26, 1999. Unless otherwise indicated, each
person is the record owner of, and has sole voting and investment power with
respect to his or her shares. The number of issued and outstanding shares used
to calculate the percentage of total ownership includes any shares covered by
the options issued to the individual or to members of the group, as applicable.
2
<PAGE> 6
STOCK OWNED BY MANAGEMENT (CONTINUED)
<TABLE>
<CAPTION>
Name of Director Amount and Nature of Percent
or Executive Officer Beneficial Ownership of Class
- -------------------- -------------------- --------
<S> <C> <C>
Anthony G. Bittel 499,581(1) 2.93%
Samuel A. B. Boone 216,209(2) 1.27%
Thomas R. Brumley (3) 130,823(4) *
President and CEO
Cecile W. Garmon 150(5) *
C.M. Gatton 4,300,209(6) 25.20%
Gary H. Latham 350,466(7) 2.05%
Raymond C. McKinney 133,512(8) *
Ralph L. Oliver 720,722(9) 4.22%
John S. Penn (3) 148,452(10) *
Executive Vice President
Allan R. Rhodes 41,057(11) *
Jim R. Shelby 350(12) *
David W. Smith, Jr 146,402(13) *
Thomas N. Thompson 658,213(14) 3.86%
Don Vitale 61,500(15) *
Pollard White 11,250(16) *
Cy M. Williamson 105,100(17) *
Director Emeritus
<CAPTION>
Named Executive Officers
- ------------------------
Donald A. Leibee 7,598(18) *
Senior Vice President-
Loan Administration
John A. Ray 11,480(19) *
Executive Vice President-
Chief Financial Officer
Timothy O. Shelburne 4,964(20) *
Senior Vice President-
General Counsel
--------- -----
All directors and executive
officers as a group (19 persons) 7,548,038 44.23%
</TABLE>
- -------------------------------------
* Represents less than 1.00% of the Corporation's common stock.
3
<PAGE> 7
STOCK OWNED BY MANAGEMENT (CONTINUED)
(1) Shares represented include 185,618 shares held by A.G. Bittel
Trust, 50,000 shares held by M.A. Bittel Trust, 11,500 shares
held by Bittel Investment, Inc., 251,800 shares held by Bittel
Family Limited Partnership and 663 shares held by Mr. Bittel's
spouse.
(2) Shares represented include 59,950 shares held by Boone
Enterprises #8 and 63,147 shares held by Boone Enterprises #7.
(3) Mr. Brumley and Mr. Penn are also executive officers of the
Corporation.
(4) Shares represented include 3,970 shares held by T.R. Brumley
IRA and 4,061 shares held by the Corporation's 401(k) plan for
the benefit of Mr. Brumley.
(5) Ms. Garmon owns 150 shares of record.
(6) 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, 5,000 shares held
by the C. M. Gatton IRA and 483 shares held by Mr. Gatton's
spouse.
(7) Shares represented include 17,760 shares held by Mr. Latham's
spouse.
(8) Shares represented include 73,272 shares held by Mr.
McKinney's spouse and 6,490 shares held by Ethel H. McKinney
Trust.
(9) Shares represented include 360,511 shares held by Mr.Oliver's
spouse.
(10) Shares represented include 3,147 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.
(11) Shares represented include 17,116 shares held in custody for
the benefit of Mr. Rhodes and 23,941 shares held by A. Rhodes
IRA.
(12) Mr. Shelby owns 350 shares of record.
(13) 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 6,550 shares held by Shawnee Park Shopping
Center.
(14) Shares represented include 4,500 shares held by Mr. Thompson
under the Uniform Gifts to Minors Act and 5,658 shares held by
Mr. Thompson as trustee for the benefit of his children.
(15) Shares represented include 13,732 shares held by D. Vitale
Trust, 18,204 shares held by Manchester Capital, LLC, 14,564
held in trust for the benefit of various members of Mr.
Vitale's family and 15,000 shares held by the Vitale
Charitable Lead Trust.
(16) Shares represented include 5,675 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.
4
<PAGE> 8
STOCK OWNED BY MANAGEMENT (CONTINUED)
(17) Mr. Williamson is standing for election as a Director
Emeritus. Accordingly, he is not considered a Director Nominee
under applicable legal requirements.
(18) Shares represented include 2,328 shares held by D. Leibee IRA
and 3,452 shares held by the Corporation's 401(k) plan for the
benefit of Mr. Leibee.
(19) 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.
(20) Shares represented include 909 shares held jointly with
spouse, 1,878 shares in T. Shelburne Rollover IRA and 1,268
shares held by the Corporation's 401(k) plan for the benefit
of Mr. Shelburne.
COMPLIANCE WITH SECTION 16 (A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 (a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's directors and executive officers and persons who own
beneficially more than 10% of the Corporation's outstanding common stock to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in their ownership of the Corporation's common stock.
Directors, executive officers and greater than 10% shareholders are required to
furnish the Corporation with copies of the forms they file. To our knowledge,
based on our review of these reports, during the year ended December 31, 1998,
our directors, executive officers and greater than 10% shareholders complied
with all applicable Section 16 (a) filing requirements, except as follows: Mr.
Samuel A. B. Boone failed to file a Form 4 for the conversion of Cardinal
Bancshares stock into 24,473 shares of the Corporation's stock. The preceding
exception was corrected as soon as it was discovered.
PROPOSAL ONE: ELECTION OF DIRECTORS
Among the items to be acted upon at the annual meeting of shareholders
is the election of fifteen directors. Each person elected will serve a term in
office of one year and until his or her successor is duly elected and qualified,
except Mr. Williamson. Mr. Williamson will serve as Director Emeritus until his
resignation or death. Each nominee to serve as a director is currently a
director of the Corporation, except Mr. Thompson.
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 17, 1999, the Board has fixed
the number of directors at fifteen.
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. 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 votes his or her shares cumulatively for someone other than the
nominees named below, or for less than all of such nominees, the persons named
in the enclosed proxy card, or their substitutes, or a majority of them, shall
have complete discretion to vote cumulatively for less than all of the nominees
named below, for any substitute nominees, and for such of the persons nominated
as they may choose.
5
<PAGE> 9
NOMINEES FOR ELECTION TO THE BOARD
<TABLE>
<CAPTION>
Position with Service
Name Age the Corporation Since (1)
- ----- --- --------------- ---------
<S> <C> <C> <C>
Anthony G. Bittel 82 Director 1976
Samuel A. B. Boone 38 Director 1996
Thomas R. Brumley 60 President, President and CEO 1982
Cecile W. Garmon 60 Director 1998
C. M. Gatton 67 Director and Chairman 1976
Gary H. Latham 67 Director 1986
Raymond C. McKinney 66 Director and Vice Chairman 1986
Ralph L. Oliver 68 Director 1987
John S. Penn 47 Executive Vice President 1987
Allan R. Rhodes 75 Director 1984
Jim R. Shelby 62 Director 1999
David W. Smith, Jr. 56 Director 1980
Thomas N. Thompson 50 Nominee 1986
Don Vitale 60 Director 1998
Pollard White 78 Director 1986
Cy M. Williamson 77 Director Emeritus 1986
</TABLE>
- --------------------------------------
(1) Dates reflect service with the Corporation or one of its
subsidiaries.
The Board of Directors recommends that you vote "FOR" each of the
nominees listed above.
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"), Broadway Bank & Trust ("Broadway"),
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"), Peoples Commercial Bank ("Peoples"),
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.
6
<PAGE> 10
BUSINESS EXPERIENCE OF DIRECTORS (CONTINUED)
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.
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 the Chief Executive Officer 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. He has also served as Vice Chairman of the Corporation since 1986 and as a
director of First City.
Ralph L. Oliver served as Chairman of Peoples Commercial Bancorp from
1989 until January 1999, when Peoples Commercial Bancorp merged with the
Corporation. He is a partner in Sisco Industrial Warehouse, President of Bisco
Industrial Warehouse, Inc. and COB Inc., and owner of Oliver Warehouse Co. and
Winchester Warehouse, Inc., all of which are commercial storage warehouses. He
also serves as a director of Peoples.
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 (Cardinal merged with the Corporation on
September 30, 1997). 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 serves as a director
of Broadway and 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.
Jim R. Shelby, CPA, has served as Executive Vice President of The Trust
Company of Knoxville, a state bank with only trust powers, and operated a public
accounting practice since 1997. He also serves as a Director of BankFirst, a
Tennessee state banking association in Knoxville, Tennessee, and Industrial
Ceramic Solutions, a pollution control company in Oak Ridge, Tennessee. He was a
partner in Arthur Andersen & Co. from December 1993 until July 1994 and was
Market Managing Partner for Coopers & Lybrand from July 1994 until December
1996.
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.
Thomas N. Thompson has served as President of Thompson Homes, Inc., a
residential construction and land development company since 1984. He also serves
as President of Diversified Management, Inc., a property management company,
Vice President of Martin-Thompson, Inc., a residential construction and land
development company, and is a partner in several rental real estate
partnerships. He also serves as a director of Owensboro National.
7
<PAGE> 11
BUSINESS EXPERIENCE OF DIRECTORS (CONTINUED)
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, a manufacturer of gas
logs, space heaters and related products. 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.
MEETINGS AND COMMITTEES
During 1998, the Board of Directors of the Corporation held 12 regular
meetings and no special meetings. During 1998 the Audit Committee met 4 times.
Each of the directors attended at least 75%, except for William H.
Thompson who attended 66% 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, and Cy M. Williamson, who serves as Director Emeritus.
The members of the Audit Committee are Billy H. Brenner (director of
Citizens Deposit Bank), Cecile W. Garmon, Jean Kirkpatrick (director of Southern
Deposit Bank), Gary H. Latham, Allan R. Rhodes, David W. Smith, Jr. 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
discussed below under "Executive Compensation".
EXECUTIVE COMPENSATION
The following table 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 1998 whose compensation exceeded
$100,000. The compensation policies and practices of the Corporation are
described under the section, "Report of the Board of Directors on Executive
Compensation".
8
<PAGE> 12
EXECUTIVE COMPENSATION (CONTINUED)
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Other Restricted Securities All
Annual Stock Underlying Other
Name and Compen- Awards Options/ LTIP Compensation
Principal Position Year Salary Bonus sation (1) ($) SARs (#) Payouts ($) (2)
------------------ ---- ------ ----- ---------- --- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas R. Brumley 1998 228,000 22,000 5,000
President and CEO 1997 228,000 --- 4,750
1996 196,000 20,000 4,750
John S. Penn 1998 172,981 25,000 5,000
Executive Vice 1997 175,000 --- 7,000
President 1996 142,040 --- 5,682
John A. Ray 1998 131,846 24,907 5,000
Executive Vice Presi- 1997 109,100 8,041 95,445(3) 4,100
dent-Chief Financial 1996 99,999 --- 3,500
Officer
Donald A. Leibee 1998 108,615 19,464 4,551
Senior Vice President- 1997 100,338 8,041 95,445(3) 3,793
Loan Administration 1996 96,000 --- 3,360
Timothy O. Shelburne 1998 107,231 19,464 5,000
Senior Vice President- 1997 100,392 8,041 95,445(3) 4,800
General Counsel 1996 98,000 --- 4,750
</TABLE>
- -----------------------------
(1) We have omitted information on "perks" and other personal
benefits because the aggregate value of these items does not
meet the minimum amount required for disclosure under
Securities and Exchange Commission regulations.
(2) Represents amounts contributed to the 401(k) plan on behalf of
executive officers.
(3) The value of the restricted stock awards as of December 31,
1998 was $119,306 for Mr. Ray, Mr. Leibee and Mr. Shelburne
based on a closing price of $26.25, being the closing price on
the Nasdaq National Market on December 31, 1998.
9
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
There were no option grants by the Corporation to the named executive
officers during the 1998 calendar year.
RESTRICTED STOCK GRANTS IN LAST FISCAL YEAR
There were no stock grants by the Corporation to the named executive
officers during the 1998 calendar year.
OPTIONS EXERCISED AND OPTION HOLDINGS
The following table contains information about option exercises during
1998 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, 1998:
<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 $2,230,088/0
</TABLE>
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. Average compensation is generally computed using the five
consecutive years prior to retirement that yield the highest average.
The following table describes 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>
10
<PAGE> 14
PENSION PLAN (CONTINUED)
The following table shows the named executive officers' years of
credited service, to the nearest year and current compensation covered by the
pension plan:
<TABLE>
<CAPTION>
Current Compensation
Executive Officer Years of Service Covered by the Pension Plan
- ----------------- ---------------- ---------------------------
<S> <C> <C>
Thomas R. Brumley 17 $150,000
John S. Penn 12 150,000
Donald A. Leibee 15 130,000
John A. Ray 16 150,000
Timothy O. Shelburne 6 130,000
</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 basis 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.
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) option, employees with six months of
service may become participants. Contributions made to the plan by participants
are fully vested when made.
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 to contribute up to 15% of his or her salary to the 401(k)
Plan. Secondly, the Corporation will make a contribution to the 401(k) Plan
equal to 50% of the employee's contribution to the plan up 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.
11
<PAGE> 15
COMPENSATION OF DIRECTORS
For the year ended December 31, 1998, each non-management director
received a fee of $500 for each board meeting attended and $100 for each
committee meeting attended. The board fee will remain unchanged for 1999.
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. Executive officers are elected annually by the Board of
Directors.
Thomas R. Brumley, age 60, 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 Chief Executive Officer
of Owensboro National from 1983 to 1990.
Edward F. Johnson, age 63, 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 54, 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 47, has served as Executive Vice President of the
Corporation since 1997. 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.
John A. Ray, age 43, has served as Executive Vice President and Chief
Financial Officer of the Corporation since December 1998. He served as President
and Chief Executive Officer of Owensboro National from 1997 to 1998. 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 42, has served as General Counsel of the
Corporation since January 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 Chief Executive Officer of the Corporation, participates
in compensation discussions and decisions affecting other executive officers of
the Corporation.
12
<PAGE> 16
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.
The Committee adjusts base salaries annually within a current 4 percent
guideline. Base salaries are augmented by an 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 as follows:
1. A bonus limitation of 7 percent of net income including accrual of bonus and
401(k) contribution.
2. 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.
3. 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,
whichever is less.
(c) Above Average-Receive 10% of pool fund or a range of 3-8% of
salary, whichever is less.
(d) Average or Below-May receive $600 or 1/2 of lowest bonus in Above
Average category, whichever is less.
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 officers 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.
1998 COMPENSATION FOR THE PRESIDENT & CEO
The Committee reviewed the compensation package for Chief Executive
Officers at peer institutions ($1 billion to $2 billion in size) to establish a
competitive view of executive compensation. The Committee then considered the
Corporation's overall performance, record for increasing shareholder value,
success in meeting strategic objectives and leadership. Based on these factors
and the Corporation's financial results, the Committee determined Mr. Brumley's
base salary for 1998.
Mr. Brumley received $22,000 as an incentive bonus during 1998. 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.
13
<PAGE> 17
SECTION 162(M) OF THE INTERNAL REVENUE CODE
It is our responsibility to address the issues raised by Section 162(m)
of the Internal Revenue Code, as amended. The revisions to Section 162(m) made
certain nonperformance-based compensation in excess of $1,000,000 to executives
of public companies nondeductible to the companies beginning in 1994. We have
reviewed these issues and have determined that no portion of compensation
payable to any executive officer for 1998 is nondeductible.
Submitted by the Compensation Committee:
C. M. Gatton (Chairman) John S. Penn
Anthony G. Bittel Allan R. Rhodes
Samuel A. B. Boone Jim R. Shelby
Thomas R. Brumley David W. Smith, Jr.
Cecile W. Garmon Don Vitale
Gary H. Latham Pollard White
Raymond C. McKinney Cy M. Williamson, Director Emeritus
Ralph L. Oliver
COMPARATIVE STOCK PERFORMANCE
The following Performance Graph compares the cumulative total
shareholder return on the Corporation's common stock from June 30, 1995 through
December 31, 1998 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 included in the Performance
Graph assume an investment of $100 in the Corporation's common stock, the Broad
Market Index and the Industry Index on June 30, 1995 with the reinvestment of
all dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN OF AREA BANCSHARES, BROAD MARKET INDEX AND
INDUSTRY INDEX
FINANCIAL PERFORMANCE
<TABLE>
<CAPTION>
6/95 12/95 6/96 12/96 6/97 12/97 6/98 12/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Area 100.000 94.030 115.260 129.310 145.480 152.280 216.250 167.390
Market 100.000 113.413 128.385 139.465 156.077 171.100 205.996 240.522
Peer 100.000 123.187 130.164 162.642 203.455 272.319 282.379 269.733
</TABLE>
Prior to January 2, 1996 the Corporation's common stock 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 was often 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. The Corporation has
not attempted 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.
14
<PAGE> 18
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
At December 31, 1998 the Corporation did not have any 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 the Corporation's affiliates 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 that are both
customers of the Corporation's affiliates and that have had and expect to have
business and banking transactions with the Corporation's affiliates 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 affiliates, did not involve more than normal risk of
collectibility or present other unfavorable or unusual features.
PROPOSAL TWO: INDEPENDENT PUBLIC ACCOUNTANTS
For the fiscal year ended December 31, 1998, the accounting firm of
KPMG 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 LLP. A representative from the firm of KPMG 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
The Corporation will provide its shareholders with a copy of its Annual
Report on Form 10-K which is required to be filed with the Securities and
Exchange Commission for the year ended December 31, 1998. There is no charge for
this Annual Report. Requests should be in writing and should be addressed to:
Secretary
Area Bancshares Corporation
P.O. Box 786
Owensboro, Kentucky 42302-0786
OTHER MATTERS
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 card confers discretionary
authority with respect to any other matters that may properly come before the
meeting.
It is important that proxies be returned promptly. The Corporation
requests that whether or not you expect to attend in person, return your proxy
card to be sure that a quorum is present at the meeting. You may send your proxy
card to the Corporation in the enclosed postage-paid envelope.
By Order of the Board of Directors
/s/ Thomas R. Brumley
- -------------------------------------
Thomas R. Brumley
President and Chief Executive Officer
Owensboro, Kentucky
April 16, 1999
15
<PAGE> 19
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 17, 1999
The Board of Directors recommends a vote FOR Items 1 and 2.
The undersigned hereby appoints Raymond C. McKinney and David W. Smith,
and either of them, or their designees, each with full power of substitution, as
lawful proxies to represent and vote at the annual meeting of the shareholders
of the Corporation to be held on Monday, May 17, 1999, commencing at 11:00 A.M.
Central 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 that may properly come before the
meeting:
1. Election of (15) directors to serve for a term of 1 year ending in
2000. The nominees are: Anthony G. Bittel, Samuel A.B. Boone, Thomas R.
Brumley, Cecile W. Garmon, C.M. Gatton, Gary H. Latham, Raymond C.
McKinney, Jr., Ralph L. Oliver, John S. Penn, Allan R. Rhodes, Jim R.
Shelby, David W. Smith, Jr., Thomas N. Thompson, Don Vitale, and
Pollard White.
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY [ ] FOR all nominees
listed. to vote for all EXCEPT nominees
nominees listed. whose names
are written in
the space below.
- --------------------------------------------------------------------------------
2. Ratification of the appointment of KPMG 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.
The undersigned hereby ratifies and confirms that the proxies appointed
above, or either of them , or their designees, may lawfully do or cause to be
done by virtue hereof, and acknowledges receipt of the notice of the annual
meeting and the Proxy Statement accompanying it.
Dated ,1999
--------------------------------
--------------------------------------------
--------------------------------------------
Please insert date of signing. Please sign
exactly as name appears at left. If signing
as attorney, administrator, executor,
trustee, or guardian, give full title as
such.
