<PAGE> 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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CHARTER BANCSHARES, INC.
- - -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
CHARTER BANCSHARES, INC.
2600 CITADEL PLAZA DRIVE
HOUSTON, TEXAS 77008
(713) 692-6121
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 1995
To the Shareholders of Charter Bancshares, Inc.:
The annual meeting of shareholders of Charter Bancshares, Inc., a Texas
corporation, will be held at 10:00 a.m., Houston time, on Thursday, April 27,
1995, at the Galleria banking facilities of Charter National Bank-Houston,
5433 Westheimer, Houston, Texas, for the purpose of considering and voting
upon the following matters:
1. Election of Directors - To elect nine directors to hold office until
the next annual meeting of shareholders and until their successors
shall be duly elected and qualified.
2. Other Business - To transact such other business as may properly come
before the meeting or any adjournment thereof.
As of the date of this notice, management does not know of any such
other business to be presented at the meeting.
Shareholders of record at the close of business on March 1, 1995, are
entitled to notice of and to vote at the annual meeting or any adjournment
thereof. Further information concerning the meeting, the nominees for
election as directors and the other matters to be voted upon at the meeting
is set forth in the accompanying proxy statement.
By order of the Board of Directors,
/s/ JERRY E. FINGER
-----------------------------------
Jerry E. Finger
Chairman
Houston, Texas
April 7, 1995
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD(S) IN THE
ENVELOPE PROVIDED AT YOUR EARLIEST CONVENIENCE.
<PAGE>
CHARTER BANCSHARES, INC.
2600 CITADEL PLAZA DRIVE
HOUSTON, TEXAS 77008
(713) 692-6121
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD APRIL 27, 1995
GENERAL MATTERS
The annual meeting of shareholders of Charter Bancshares, Inc.
("Charter") will be held on April 27, 1995, at the time and place set forth
in the foregoing notice. This proxy statement is first being mailed on or
about April 7, 1995, to shareholders of record as of the record date of March
1, 1995, accompanied by Charter's 1994 Annual Report to Shareholders for the
year ended December 31, 1994.
The accompanying proxy is solicited by the Board of Directors of
Charter, and Charter will bear the cost of solicitation, including charges of
brokerage firms and others to forward this proxy material to beneficial
owners of Charter stock. All valid proxies received will be voted as
specified, but if no directions are made, the proxies will be voted IN FAVOR
of the election as directors of the persons listed as nominees herein and at
the discretion of the holders of the proxies concerning any other matters
which may properly be brought before the meeting. Each share of Common Stock
and Preferred Stock is entitled to one vote, and each share of Special Common
Stock is entitled to 14 votes. The affirmative vote of the holders of a
majority of votes represented at the meeting voting together without
distinction as to class is required to elect directors. Proxies may be
revoked at any time prior to their exercise.
Subsidiaries of Charter include CBH, Inc., Charter National Bank-Houston
("Charter-Houston"), Charter National Bank-Colonial ("Charter-Colonial"),
University National Bank-Galveston ("University National"), Charter Bank,
SSB, Charter Mortgage Company, Charter Venture Group, Inc. ("Charter
Venture"), Charter-Houston Securities, Inc. (formally known as Charter
Leasing, Inc.), and Charter-Colonial Securities, Inc. Investors Services at
Charter Banks ("Investor Services") operates as a consortium of
Charter-Houston and Charter-Colonial. Charter and its subsidiaries are from
time to time collectively referred to in this proxy statement as the
"Company."
VOTING STOCK AND PRINCIPAL HOLDERS
Shareholders of record at the close of business on March 1, 1995, are
entitled to notice of and to vote at the annual meeting or any adjournment
thereof. On March 1, 1995, there were outstanding 14,201 shares of Preferred
Stock entitled to one vote per share, 5,773,216 shares of Common Stock
entitled to one vote per share (which amount excludes 170,275 shares of
treasury stock acquired and held by the Company in partial satisfaction of
debts previously contracted for), and 256,421 shares of Special Common Stock
entitled to 14 votes per share (representing a total of 3,589,894 votes), or
an aggregate total of 9,377,311 votes entitled to be cast together as if a
single class at the meeting.
The table set forth on the following page indicates those persons known
to management to be the beneficial owners as of March 1, 1995 of more than 5%
of any class of Charter's capital stock. In addition to Charter's Common
Stock and Preferred Stock, as of March 1, 1995, shares of Special Common
Stock have been issued by Charter in two series, designated as Class B
Special Common Stock and Series C Special Common Stock, respectively.
<PAGE>
<TABLE>
<CAPTION>
Amount and nature
of beneficial Percent
Title of class Name and address of beneficial owner ownership(1) of class
- - -------------- ------------------------------ ------------------ --------
<S> <C> <C> <C>
Common Stock Jerry E. Finger 1,556,606(2)(3)(4) 26.96%
Managing General Partner
Finger Interests Number One, Ltd.
2600 Citadel Plaza Drive
Houston, Texas 77008
NationsBank Corporation 2,532,619(5) 43.87%
100 N. Tryon Street
Charlotte, North Carolina 28255
Special Common Jerry E. Finger 255,691(4)(6) 99.71%
Stock Managing General Partner
Finger Interests Number One, Ltd.
2600 Citadel Plaza Drive
Houston, Texas 77008
Preferred Stock Trust for the benefit of the 1,617 11.39%
children of Jerry E. Finger
c/o Charter National Bank-Houston
P.O. Box 4525
Houston, Texas 77210-4525
Jerry E. Finger 770(4)(7) 5.42%
2600 Citadel Plaza Drive
Houston, Texas 77008
Robert L. Hilsher 732 5.15%
1105 Martin
Houston, Texas 77018
<FN>
- - ----------
(1) Except as indicated by footnote, these shares are held of record with
sole voting and investment power.
(2) For long-term estate planning purposes and pursuant to an agreement of
limited partnership executed as of March 9, 1992, all of the shares of
Common Stock and Special Common Stock owned by the following persons and
entities were contributed to Finger Interests Number One, Ltd. (the
"Finger Family Partnership"): (i) Jerry E. Finger, except for 4,686
shares which he owns directly, (ii) his spouse, (iii) various trusts
created for the benefit of Mr. Finger's children (the "Finger Children's
Trusts"), except for 3,947 shares of Common Stock and 236 shares of
Special Common Stock acquired by the Finger Children's Trusts subsequent
to formation of the Finger Family Partnership, (iv) a partnership
comprised of Mr. Finger and three other trusts created for the benefit
of Mr. Finger's children ("JEF Partnership"), (v) one of Mr. Finger's
sons, and (vi) 17,640 shares of Common Stock owned by L.R. Jalenak, Jr.,
an advisory director to the Company's board of directors. All such
shares were transferred to the Finger Family Partnership on September 27,
1993, after the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") approved the application of the Finger Family
Partnership to become a bank holding company under the Bank Holding
Company Act of 1956, as amended. Pursuant to the terms of the Finger
Family Partnership's limited partnership agreement, Mr. Finger in his
capacity as managing general partner has sole voting and dispositive
power over all of the shares of Common Stock and Special Common Stock
which are owned by the Finger Family Partnership. Under the terms of
such limited partnership agreement, Mr. Finger may resign but cannot be
removed as managing general partner. Accordingly, Mr. Finger will make
all voting and disposition decisions with respect to the shares of Common
Stock and Special Common Stock owned by the Finger Family Partnership,
including the voting of such shares at the 1995 annual meeting of
shareholders.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
(3) Excludes (i) 4,686 shares of Common Stock which Mr. Finger owns
directly and (ii) 5,205 shares of Common Stock which Mr. Finger owns
indirectly as co-trustee of a trust created for the benefit of one of
his brother's children, as to which he has shared voting power
(collectively referred to herein as the "Non-Partnership Shares"). Also
excludes 3,947 shares of Common Stock owned directly by the Finger
Children's Trusts which were acquired subsequent to formation of the
Finger Family Partnership; the percent of such class of Mr. Finger
including such excluded shares would be 27.20%.
(4) As (i) the managing general partner of the Finger Family Partnership and
(ii) the direct beneficial owner of (A) the Non-Partnership Shares and
(B) 770 shares of Preferred Stock, initial series, as more fully
described in footnote (7) below, Mr. Finger is the holder of record
as of March 1, 1995 of shares representing 5,146,941 votes, or 54.89%
of the votes eligible to be cast at the meeting; the percent of votes of
Mr. Finger including 8,868 votes attributable to the shares of Common
Stock, Special Common Stock and Preferred Stock of which the Finger
Children's Trusts are the holders of record as of March 1, 1995,
is 54.98%.
(5) NationsBank Corporation, Charlotte, North Carolina ("NationsBank"), owns
shares of Common Stock representing in the aggregate 27.01% of the votes
eligible to be cast at the meeting. NationsBank operates full-service
banks throughout the eastern, southeastern and southwestern regions of
the United States and maintains various offices throughout the world.
(6) Excludes 236 shares of Special Common Stock owned directly by the Finger
Children's Trusts which were acquired subsequent to formation of the
Finger Family Partnership; the percent of such class of Mr. Finger
including such excluded shares would be 99.81%.
(7) Includes 298 shares of Preferred Stock owned by a corporation of which
Mr. Finger is the controlling shareholder and sole director, but excludes
1,617 shares of Preferred Stock owned by the Finger Children's Trusts;
the percent of such class of Mr. Finger including such excluded shares
would be 16.81%.
</TABLE>
ELECTION OF DIRECTORS
Management of Charter has nominated the nine persons named below for
election to the Board of Directors of Charter. Each director elected will
hold office until the next annual meeting of shareholders or until his
successor is elected and qualified. Charter has no reason to believe that
any nominee will be unavailable at the time of election, but if any nominee
should not continue to be available for election, discretionary authority may
be exercised by the persons named in the accompanying proxy to vote for a
substitute. The Investment Agreement dated November 6, 1987, between Charter
and NationsBank provides that management of Charter will nominate at least one
person designated by NationsBank for election to Charter's Board of Directors
for so long as NationsBank owns Charter stock representing more than ten
percent of the combined voting power of all classes of Charter stock. Pursuant
to the foregoing arrangement, NationsBank has designated Frank L. Gentry as
its nominee selection, which selection management supports by renominating
Mr. Gentry as a nominee for election to the Board of Directors.
The nine nominees are as follows:
<TABLE>
<CAPTION>
Principal occupation Served as
Name of nominee(1) and other directorships(2)(3) director since Age
- - ----------------- ----------------------------- -------------- ---
<S> <C> <C> <C>
Andrew M. Alexander President, Weingarten Realty 1984(4)(5) 38
Management Company
Donald R. Collins, Ph.D. Superintendent of Schools, Klein 1975(6) 59
Independent School District
</TABLE>
3
<PAGE>
(Nominees continued)
<TABLE>
<CAPTION>
Principal occupation Served as
Name of nominee(1) and other directorships(2)(3) director since Age
- - ----------------- ----------------------------- -------------- ---
<S> <C> <C> <C>
Winston C. Davis Senior Vice President of Charter 1988 62
Vice Chairman of Charter-Houston
Jerry E. Finger Chairman and Chief Executive Officer 1963(5) 62
of Charter
Frank L. Gentry Executive Vice President, 1987 52
NationsBank Corporation
William M. Hatten Senior Judge, 1964(5) 81
Texas Judicial System
R. Steve Letbetter President and Chief Operating Officer 1992 46
Houston Lighting & Power Co.
Herschel G. Maltz Chairman and CEO, 1966(5) 65
I.P.S. Systems, Inc.
W. J. Smith, Jr. Retired, former Chairman, Loan 1989(7) 73
Policy Committee, NCNB National Bank
of North Carolina
<FN>
- - ----------
(1) Thomas C. Sooy, Senior Vice President and Chief Credit Officer of
Charter, has served as an advisory director of Charter since his
appointment by the Board of Directors on January 26, 1989. L. R.
Jalenak, Jr., personal investments and management consultant, has
served as an advisory director since June 18, 1992. It is anticipated
that at its next annual organizational meeting the Board of Directors
will reappoint Messrs. Sooy and Jalenak as advisory directors for the
ensuing year.
(2) Includes last five years, except for Messrs. Gentry, Letbetter, and
Maltz. Immediately prior to being promoted to executive vice president
of NationsBank on April 1, 1993, Mr. Gentry served as senior vice
resident of NationsBank, a position he had held for more than the five
prior years. Immediately prior to being promoted to president and chief
operating officer of Houston Lighting & Power Co. on July 1, 1993,
Mr. Letbetter served as group vice president, a position he had held
for more than the five prior years. Mr. Maltz has served as chairman
and CEO of I.P.S. Systems, Inc. since its formation in December, 1993.
From October 1, 1993 to December, 1993, Mr. Maltz handled personal
investments and served as a management consultant. From May 1, 1992 to
September 30, 1992, Mr. Maltz served as president and vice chairman of
Petrolon Holdings, Inc. Mr. Maltz retired as president and chief
executive officer of Century Papers, Inc. on November 15, 1990, a
position he had held for more than the five prior years.
(3) Three nominees serve as directors of companies that are reporting
companies under the Securities Exchange Act of 1934, as amended.
Mr. Alexander serves as a director of Weingarten Realty Investors.
Mr. Maltz serves as a director of Sterling Electronics Corporation.
Mr. Smith serves as a director of Burroughs & Chapin Company.
Mr. Letbetter has been nominated for election to the board of
directors of Houston Industries, Inc. and Houston Lighting and Power
Company in connection with their annual meetings to be held in May, 1995.
(4) Mr. Alexander was appointed to the Board of Directors of Charter on
July 28, 1994, to fill a vacancy created by an increase in the number of
directors in accordance with Charter's bylaws.
(5) Includes service as a director of Charter-Houston prior to the
organization of Charter.
(6) Includes service as a director of Charter-Colonial prior to the
organization of Charter.
(7) Mr. Smith presently is president and the sole shareholder of WJS
Financial Services, Inc.; in this capacity Mr. Smith acts as an
independent consultant to various financial institutions. In connection
with his service on Charter's Board of Directors as a nominee originally
designated by NationsBank, Mr. Smith is engaged by NationsBank under a
retainer arrangement pursuant to which Mr. Smith will advise Charter
management, on an ongoing basis and to the extent such advice is sought
by Charter management, with respect to various policies and procedures
either in place or contemplated by Charter management.
</TABLE>
4
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of Charter has an Executive Committee, an Audit
Committee, a Compensation Committee, an Asset Quality Committee, a Stock
Appreciation Rights Committee ("SAR Committee") and a Management Incentive
Compensation Plan Committee ("MICP Committee"). Charter does not have a
standing nominating committee.
On May 26, 1994, an Executive Committee was formed to exercise, to the
extent permitted by the Texas Business Corporation Act, the power and
authority of the Board of Directors whenever circumstances or other
exigencies require immediate or prompt action between regular or special
meeting of the Board of Directors. The Executive Committee met twice during
1994. As of April 7, 1995, the members of the Executive Committee are
Messrs. Finger, Gentry, Letbetter and Maltz.
The primary functions of the Audit Committee are to review the scope and
results of audits by Charter's independent auditors and internal auditors.
This responsibility requires an ongoing determination that adequate internal
controls are in effect and a recommendation annually of an independent
accounting firm. This committee met four times during 1994. As of April 7,
1995, the members of the Audit Committee were Dr. Collins, Judge Hatten, Mr.
Maltz, who serves as chairman of the committee, and Robert Y. Pagan, who also
serves as a director of University National.
The primary functions of the Asset Quality Committee are to review the
general quality of the Company's credit underwriting standards and practices,
to monitor the Company's non-performing asset portfolio, and more generally
to review current events within the Company's loan and investment portfolios.
The Asset Quality Committee met twelve times during 1994. As of April 7,
1995, the members of the Asset Quality Committee were Dr. Collins, Judge
Hatten, Mr. Letbetter, Mr. Maltz and Mr. Smith, who serves as chairman of the
committee. Mr. Jalenak serves as an advisory member of the Asset Quality
Committee.
The Compensation Committee is responsible for developing a compensation
structure that will attract and retain well-trained, productive people who
are motivated to achieve Charter's corporate objectives. The Compensation
Committee reviews remuneration to management and formulates recommendations
to the Board of Directors respecting compensation. The Compensation Committee
met three times during 1994. As of April 7, 1995, the members of the
Compensation Committee were Dr. Collins and Messrs. Gentry and Maltz, who
serves as chairman of such committee. Mr. Finger serves as an ex-officio
member of the Compensation Committee. Mr. Jalenak serves as an advisory
member of the Compensation Committee.
The SAR Committee is responsible for administering Charter's Stock
Appreciation Rights Plan (the "SAR Plan")(see succeeding section entitled
"Executive Compensation--Stock Appreciation Rights Plan"). The SAR Committee
met three times during 1994 but took numerous administrative actions by
unanimous consent in lieu of meetings in accordance with the bylaws of
Charter. The SAR Committee is comprised of the members of the Compensation
Committee who are not eligible to participate in the SAR Plan. As of April
7, 1995, the members of the SAR Committee were Dr. Collins and Messrs. Gentry
and Maltz, who serves as chairman of such committee. Mr. Finger serves as an
ex-officio member of the SAR Committee. Mr. Jalenak serves as an advisory
member of the SAR Committee.
The MICP Committee is responsible for administering the Management
Incentive Compensation Plan which was adopted by Charter's Board of Directors
in 1991 (see succeeding section entitled "Executive Compensation--Management
Incentive Compensation Plan"). The MICP Committee met three times during
1994. The MICP Committee is comprised of the members of the Compensation
Committee who are not eligible to participate in the Management Incentive
Compensation Plan. As of April 7, 1995, the members of the MICP Committee
were Dr. Collins and Messrs. Gentry and Maltz, who serves as chairman of such
committee. Mr. Jalenak serves as an advisory member of the MICP Committee.
During 1994, the Board of Directors held ten meetings. All of the
nominees for director attended 75% or more of the meetings of the Board of
Directors and of the committees on which they served during 1994.
5
<PAGE>
STOCK OWNERSHIP
The following table indicates the number of shares of Common Stock,
Special Common Stock and Preferred Stock held of record as of March 1, 1995,
by Charter's director nominees and by its director nominees and officers as a
group.
<TABLE>
<CAPTION>
Beneficial ownership information(1)
-----------------------------------------------------------------------------------
Percent Special Percent Percent
Common Stock of class Common Stock of class Preferred Stock of class
------------ -------- ------------ -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Andrew M. Alexander 1,953 Less than - - - -
1%
Donald R. Collins, Ph.D. 1,667(2) Less than - - 20 Less than
1% 1%
Winston C. Davis 51,310 Less than - - 646 4.55%
1%
Jerry E. Finger 1,566,497(2)(3)(4) 27.13% 255,691(4)(5) 99.71% 770(2)(4)(6) 5.42%
Frank L. Gentry (7) (7) (7) (7) (7) (7)
William M. Hatten 21,101(2) Less than - - 168(2) 1.18%
1%
R. Steve Letbetter - - - - - -
Herschel G. Maltz 26,026(8) Less than - - 353(8) 2.49%
1%
W. J. Smith, Jr. - - - - - -
All director nomi-
nees, advisory dir-
ectors and officers
as a group (17 per-
sons)(9)(10) 1,777,244 30.78% 255,691 99.71% 1,963 13.82%
<FN>
- - ----------
(1) Except as indicated by footnote, these shares are held of record with sole
voting and investing power.
(2) Does not include the following shares owned by the spouses or children of
the following directors and with respect to which such directors disclaim
beneficial ownership: (i) Dr. Collins: 46 shares of Common Stock; (ii) Mr.
Finger: 4,219 shares of Common Stock and 136 shares of Preferred Stock; and
(iii) Judge Hatten: 2,272 shares of Common Stock and 16 shares of
Preferred Stock.
(3) Represents shares of Common Stock of which Mr. Finger, individually or as
co-trustee, and the Finger Family Partnership are the holders as of
March 1, 1995. See the preceding section entitled "Voting Stock and
Principal Holders" for information regarding ownership of shares by the
Finger Family Partnership and Mr. Finger's power to vote such shares as
managing general partner of the Finger Family Partnership.
(4) Does not include the following shares: (i) 3,947 shares of Common
Stock owned by the Finger Children's Trusts; the percent of class of Mr.
Finger including such shares would be 27.20%: (ii) 236 shares of
Special Common Stock owned by the Finger Children's Trusts; the percent
of class of Mr. Finger including such shares would be 99.80%; and (iii)
1,617 shares of Preferred Stock owned by the Finger Children's Trusts;
the percent of series of Mr. Finger including such shares would be
16.81%. Mr. Finger beneficially owns shares representing 5,146,941
votes, or 54.89% of the votes eligible to be cast at the meeting; the
percent of the votes of Mr. Finger including 8,868 votes attributable to
the shares of Common Stock, Special Common Stock and
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Preferred Stock of which the Finger Children's Trusts are the holders of
record as of March 1, 1995, is 54.98%. See the preceding section entitled
"Voting Stock and Principal Holders" for information regarding the
ownership of shares of Common Stock by the Finger Family Partnership and
Mr. Finger's power to vote such shares as managing general partner of the
Finger Family Partnership.
(5) Represents shares of Special Common Stock of which the Finger Family
Partnership is the record holder as of March 1, 1995. See the preceding
section entitled "Voting Stock and Principal Holders" for information
regarding the ownership of shares of Special Common Stock by the Finger
Family Partnership and Mr. Finger's power to vote such shares as
managing general partner of the Finger Family Partnership.
(6) Includes 298 shares of Preferred Stock owned by a corporation of
which Mr. Finger is the controlling shareholder and sole director.
(7) Mr. Gentry does not own any shares with sole voting and investment
power. Mr. Gentry, however, is employed by NationsBank and has been
designated by NationsBank as its selection for nomination for
election to the Board of Directors of Charter. NationsBank's
ownership of Charter capital stock is described in the table and
accompanying footnotes included in the preceding section entitled
"Voting Stock and Principal Holders."
(8) Excludes 1,858 shares of Common Stock and 17 shares of Preferred
Stock, which Mr. Maltz holds as custodian under the Uniform Gift to
Minors Act, with respect to which Mr. Maltz disclaims beneficial
ownership.
(9) The total shares of Common Stock, Special Common Stock and Preferred
Stock beneficially owned by all officers and directors as a group
represent 57.15% of the votes eligible to be cast at the meeting.
(10) Footnotes 2 through 8 above are applicable to the indicated group
ownership totals.
</TABLE>
EXECUTIVE OFFICERS
Charter's executive officers are elected annually by the Board of
Directors, each to serve until the next annual organizational meeting or
until his successor is elected and qualified, unless such officer shall
sooner resign or be removed in accordance with the bylaws of Charter.
The names, ages and current position(s) held with Charter for all
executive officers are as follows:
<TABLE>
<CAPTION>
Name Age Position
- - ---- --- --------
<S> <C> <C>
Jerry E. Finger 62 Chairman, President and Chief Executive Officer
William S. Shropshire, Jr. 37 Senior Vice President, Chief Financial Officer and Treasurer
Thomas C. Sooy 48 Senior Vice President, Chief Credit Officer
Winston C. Davis 62 Senior Vice President, Investments
Michael S. Dafferner 47 Senior Vice President, Manager of Community Banking
Marshall R. Holman 46 Senior Vice President, Senior Operations Officer
Jonathan S. Finger 35 Senior Vice President, Asset Management and Investment Products
Michael A. Roy 35 Vice President, General Counsel and Secretary
</TABLE>
Mr. Jerry Finger has been chairman and chief executive officer of
Charter for over five years. On December 6, 1994, Mr. Finger was
appointed and assumed the additional duties of president of Charter.
Mr. Shropshire, a certified public accountant, has served as
treasurer of Charter for more than five years and as chief financial
officer of Charter since April 1990. On December 6, 1994, Mr.
Shropshire was promoted to the position of senior vice president of
Charter.
Mr. Sooy has been chairman and chief executive officer of
Charter-Colonial for over five years. Since 1991, Mr. Sooy has been
principally employed as chief credit officer of Charter's subsidiary
banks, with primary responsibility for day-to-day
7
<PAGE>
administration of Charter's lending activities. On December 6, 1994,
Mr. Sooy was promoted to the position of senior vice president, chief
credit officer of Charter.
Mr. Davis has been principally employed as senior vice president of
Charter for over five years, with daily responsibility for managing the
Company's investment securities portfolio.
Since he was hired on February 23, 1993, Mr. Dafferner has
principally served as executive vice president, manager of community
banking, for Charter-Houston and Charter-Colonial. Prior to joining
Charter, Mr. Dafferner was employed as executive vice president of First
City Bank-Houston, N.A., a position he held for approximately five
years. On December 6, 1994, Mr. Dafferner was promoted to the position
of senior vice president, manager of community banking of Charter.
Mr. Holman, a certified public accountant, has been senior vice
president and senior operations officer of Charter and executive vice
president and cashier of Charter-Houston for over five years.
Mr. Jonathan S. Finger has been principally employed as senior vice
president and senior trust officer of Charter-Houston's asset
management and trust services department since April, 1993. Mr. Finger
was hired on May 21, 1990, as vice president, trust and investment
services of Charter and as vice president of Charter Venture. On April
22, 1993, Mr. Finger was promoted to senior vice president, asset
management and investment products. Prior to joining Charter, Mr.
Finger was employed as an associate with Drexel Burnham & Lambert, Inc.
Mr. Finger is the son of Jerry E. Finger, chairman, president and chief
executive officer of Charter.
Mr. Roy has been general counsel and secretary of Charter for over
five years. On December 6, 1994, Mr. Roy was promoted to the position
of vice president of Charter.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During 1994 the Compensation Committee was comprised of Don
Collins, Frank Gentry and Herschel Maltz, each of whom is an outside
director of Charter, with Jerry Finger serving as an ex-officio member
of the Compensation Committee and L.R. Jalenak serving as advisory
member of the Compensation Committee. Mr. Maltz was chairman of the
committee during 1994 and continues to hold this position as of the date
of this report. This report describes the elements of Charter's
executive officer compensation programs and the basis on which 1994
compensation determinations were made by the Compensation Committee
regarding the executive officers of Charter, including those officers
named in the compensation tables also included in Charter's proxy
statement.
COMPENSATION PHILOSOPHY AND OVERALL OBJECTIVES. Charter's
executive compensation policy is predicated on the fundamental principle
that executive compensation should be linked directly to corporate
performance and increases in shareholder value, while concurrently
ensuring that key employees are motivated and retained. The following
objectives have been established by the Compensation Committee as
guidelines for compensation decisions:
- Charter must provide a competitive total compensation
package that enables Charter to attract and retain key
executives.
- All of Charter's compensation programs must be integrated
with Charter's annual and long-term business objectives so
that executives remain focused on the fulfillment of these
objectives.
- Charter's compensation package must include a variable
component that directly links compensation with the overall
performance of Charter, thereby expressly aligning executive
compensation with the interest of shareholders.
ELEMENTS OF EXECUTIVE COMPENSATION. The Compensation Committee
regularly reviews Charter's compensation programs to ensure that
remuneration levels and incentive opportunities are competitive and
reflect performance. The various components of the compensation
programs for executive officers are discussed below.
(i) BASE SALARY. Base salary levels are largely determined through
comparison with banking organizations of a size similar to Charter.
Both regional and national surveys are utilized to establish base
salaries that are within the range of those persons holding positions of
comparable responsibility at other banking organizations of a size and
complexity similar to
8
<PAGE>
Charter. In referring to national survey data, however, the
Compensation Committee has taken into consideration the lower cost of
living prevailing in Houston compared to many other major U.S. cities.
Actual base salaries also are intended to reflect individual performance
contributions as determined through performance evaluations. In
addition to individual job performance and the above-referenced market
comparisons, other factors may be taken into consideration, such as cost
of living increases as well as an individual's perceived potential with
Charter. All executive officer base salary levels are considered by the
Compensation Committee to be competitive within a necessary and
reasonable range.
It has become the established practice of the Compensation
Committee to review and, if deemed appropriate, adjust the base salaries
of various executive officers, including Jerry Finger, Tom Sooy, Winston
Davis, Mike Dafferner, and Bill Shropshire, on a biennial
(every-other-year) basis. Accordingly, the base salaries of Messrs.
Finger, Sooy, Davis, Dafferner, and Shropshire were reviewed and
adjusted during 1994 since their base salaries were not adjusted in the
prior year. Their respective base salary increases were based upon
meritorious job performance, cost of living considerations, market
comparisons, and increased job responsibilities as a result of the
decision not to fill the position vacated by Mark T. Giles, formerly the
president of Charter.
(ii) MANAGEMENT INCENTIVE COMPENSATION PLAN. Charter's officers
are eligible to participate in the Management Incentive Compensation
Plan which is referred to as the "Incentive Plan" in Charter's proxy
statement and described in detail on page 14. The objective of this
plan is to create competitive levels of compensation tied directly to
the attainment of financial objectives which the Compensation Committee
believes are the primary determinants over time of share price. More
specifically, the plan is designed to foster a systematic management
focus on the corporate goal of consistent and steady earnings growth.
The members of the Compensation Committee, all being outside directors
of Charter and not eligible to participate in the Incentive Plan, also
serve as the MICP Committee which is responsible for administering the
Incentive Plan. Mr. Finger, while an ex-officio member of the
Compensation Committee, does not serve as either a member or an
ex-officio member of the MICP Committee due to his eligibility to
participate in the Incentive Plan. Potential awards for executive
officers are intended by the Compensation Committee to be consistent
with incentive bonuses paid by banking companies of a size similar to
that of Charter, provided that actual bonuses remain subject to increase
or decrease on the basis of Charter's actual audited performance and at
the discretion of the MICP Committee. The particular formula pursuant
to which incentive bonus awards for the 1994 performance of Charter were
determined for the named executive officers is described in detail in
this proxy statement and reference is made to the discussion included on
page 14 of Charter's proxy statement. It should be noted, however, that
although Charter substantially surpassed its 1994 financial performance
objectives and the Compensation Committee therefore was authorized to
increase the incentive bonus awards beyond the aggregate maximum amount
reflected in the previously established schedule, the Compensation
Committee did not do so.
(iii) STOCK APPRECIATION RIGHTS PLAN. The Compensation Committee
believes that those persons who have responsibility for the management
and growth of Charter should be provided with a continuing long-term
incentive compensation component which correlates to increases or
decreases in shareholder value, thus ensuring that the best interests of
shareholders and managers of Charter remain closely aligned. The
Charter Stock Appreciation Rights Plan is referred to in Charter's proxy
statement as the "SAR Plan" and is described in detail on page 14. The
members of the Compensation Committee, all being outside directors of
Charter and not eligible to participate in the SAR Plan, also serve as
the SAR Committee which is responsible for administering the SAR Plan.
Jerry Finger also serves as an ex-officio member of the SAR Committee;
he does not presently participate in the SAR Plan. In making awards of
SAR units to any individual, the SAR Committee makes judgments
concerning the ability of such individual to impact the long-term
success of Charter, the past success of such individual in advancing the
long-term interests of Charter shareholders, and the number of SAR units
available under the SAR Plan. In order to broadly introduce the
principles upon which the SAR Plan is based to Charter's officers, in
1991 SAR units were awarded to those officers who attained the level of
vice president. In 1992, the SAR Committee elected to make individual
awards in larger amounts to a smaller number of eligible participants.
No individual awards were granted during 1993 or 1994. Following an
evaluation of the SAR Plan by a compensation consultant, the
Compensation Committee anticipates awarding additional SAR units in 1995
based upon the overall objective of the SAR Plan to more effectively
align the compensation of Charter's officers with the interests of
shareholders.
(iv) PROFIT-SHARING PLAN. All full-time employees of Charter and
its subsidiary banks, including its executive officers, are eligible to
participate in the Profit-Sharing Plan described in Charter's proxy
statement on page 15. For 1994 the employer contribution represented
approximately 5% of Charter's 1994 net income. Reference is made to the
discussion of the plan in Charter's proxy statement and to footnote 5 on
page 13 of the proxy statement for the contributions credited to the
accounts of the named executive officers included on the Summary
Compensation Table.
9
<PAGE>
1994 COMPENSATION OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER. In
reviewing the 1994 compensation of Jerry Finger, Charter's chairman and
chief executive officer, the Compensation Committee undertook the same
evaluation set forth above with respect to executive officers generally,
except that at this time Mr. Finger does not participate in the SAR
Plan. Mr. Finger's base salary is reviewed on an every-other-year basis
and most recently was reviewed and adjusted in October, 1992.
Accordingly, his base salary will be evaluated and adjusted in 1995 as
necessary to be reasonable and competitive based on published executive
compensation surveys. In addition to ensuring that Mr. Finger's base
salary is competitive within the banking industry and Charter's peer
group, his salary is expected to be increased in 1995 based in part on
the additional duties and responsibilities he has recently assumed as
president of Charter. His bonus for 1994 performance pursuant to the
Incentive Plan was determined after the close of the 1994 fiscal year.
In determining such bonus, MICP Committee members were provided data
concerning individual compensation history, executive compensation
survey data, and comparative information concerning performance. Mr.
Finger's 1994 bonus award was paid in recognition of the 47% increase in
Charter's net earnings per share (excluding FAS #109 adjusted in 1993);
the 15.86% return on average equity; and his involvement in the
consummation of five strategic acquisitions. Mr. Finger's performance
was considered by the MICP Committee to have surpassed expectations when
compared to the performance of competitors and other performance
requirements.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Herschel G. Maltz, Chairman
Donald R. Collins
Jerry E. Finger (ex-officio)
Frank L. Gentry
L.R. Jalenak, Jr. (advisory)
10
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The following graph compares the performance of Charter's Common
Stock for the five-year period commencing December 31, 1989, to (i) the
NASDAQ market composite index ("NASDAQ-US") and (ii) NASDAQ Bank Stocks
which are comprised of approximately 650 banks and bank holding
companies which trade on either The Nasdaq National Market System or The
Nasdaq Small-Cap Market. The graph assumes that a $100 investment was
made in Charter Common Stock and each index at December 31, 1989, and
that all dividends were reinvested. Also included are the respective
investment returns based upon the stock and index values as of the end
of each year during such five-year period.
[graph]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Charter $100 $77.779999 $72.220001 $303.32999 $334.01999 $369.78
NASDAQ-US $100 $84.919998 $ 136.28 $ 158.58 $180.92999 $176.91
NASDAQ-Banks $100 $73.230003 $ 120.17 $ 174.87 $ 199.33 $198.69
<FN>
Source: NASDAQ
</TABLE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION. The table set forth on the
following page contains certain information for each of the fiscal years
indicated with respect to the chief executive officer and the next four
most highly compensated executive officers of Charter during the fiscal
year ended December 31, 1994:
11
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
==================================================================================================
Long Term
Annual Compensation(1) Compensation
- - --------------------------------------------------------------------------------------------------
SAR Awards LTIP All Other
Name and Principal Position Year Salary Bonus(2) (Units)(3) Payouts(4) Compensation(5)
- - --------------------------- ---- ------ -------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jerry E. Finger 1994 $286,488 $154,000 -0- $10,841 $ 8,236
Chairman, President and CEO 1993 286,488 124,600 -0- 13,526 12,728
1992 267,732 112,700 -0- 4,737 13,111
- - --------------------------------------------------------------------------------------------------
Thomas C. Sooy 1994 $122,440 $ 33,000 -0- $ -0- $ 7,692
Senior Vice President, Chief 1993 112,000 30,000 -0- -0- 8,045
Credit Officer 1992 112,000 27,400 -0- -0- 5,437
- - --------------------------------------------------------------------------------------------------
Winston C. Davis 1994 $123,000 $30,000 -0- $ -0- $ 7,760
Senior Vice President, 1993 123,000 27,000 -0- -0- 8,147
Investments 1992 118,584 26,900 -0- -0- 7,263
- - --------------------------------------------------------------------------------------------------
Michael S. Dafferner 1994 $120,000 $24,000 -0- $ -0- $3,771
Senior Vice President, Manager 1993 101,846 18,000 11,025 -0- 215
of Community Banking
- - --------------------------------------------------------------------------------------------------
William S. Shropshire, Jr. 1994 $85,000 $35,000 -0- $ -0- $4,926
Senior Vice President, Chief 1993 85,000 20,500 -0- -0- 5,452
Financial Officer and 1992 81,042 19,500 2,205 -0- 4,334
==================================================================================================
<FN>
(1) Other annual compensation, if any, provided to the named executive
officers during 1994, 1993 or 1992 did not exceed the disclosure
requirements of the rules promulgated by the SEC.
(2) Amounts indicated in this column represent incentive awards paid
to the named executive officers under the Charter Bancshares, Inc.
Management Incentive Compensation Plan (See succeeding section entitled
"Executive Compensation--Management Incentive Compensation Plan").
(3) Amounts indicated in this column represent stock appreciation
rights units ("SAR Units") awarded to the named executive officers under
the 1991 Charter Bancshares, Inc. Stock Appreciation Rights Plan (see
succeeding section entitled "Executive Compensation--Stock Appreciation
Rights Plan"). With respect to the SAR Units awarded in 1992, the
amounts indicated in this column have been adjusted for 5% stock
dividends paid on Charter's Common Stock in September, 1993 and October,
1994. In addition to the amounts indicated in this column, in 1991
Messrs. Sooy, Davis, and Shropshire were awarded 6,946, 6,946 and 5,788
SAR Units, respectively, as adjusted for three stock dividends paid on
Charter's Common Stock subsequent to issuance of such SAR units.
(4) As used herein, the term "LTIP" means long-term incentive plan.
Amounts indicated in this column for Mr. Finger represent earnings on
existing account balances under Charter's Deferred Plan that had been
accrued as a result of the achievement of profit objectives established
under such plan but payment of which was deferred at the election of the
named executive officer, but does not include a two contributions of
$14,324 each which was made to Mr. Finger's Deferred Plan account as of
January 1, 1993 and January 1, 1994, which are more fully discussed in
the succeeding section entitled "Executive Compensation--Executive
Deferred Compensation Plan" beginning on page 15 of this proxy statement.
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
(5) Amounts indicated in this column for 1994 are derived from the
following: (i) employer profit-sharing contributions and 401(k) thrift
plan matching employer contributions credited to the respective accounts
of Messrs. Finger, Sooy, Davis, Dafferner and Shropshire, as follows:
$7,864, $7,320, $7,388, $3,409 and $4,609, such amounts, however, (A) do
not include trust forfeitures occurring under the terms of the
Profit-Sharing Plan but do include trust forfeitures used to fund a
portion of the 401(k) thrift plan matching employer contributions and
(B) do not include earnings on the undistributed balance held pursuant
to the Profit-Sharing Plan for the benefit of participants therein or
earnings with respect to any 401(k) thrift plan matching employer
contributions; and (ii) term life insurance premiums paid by Charter for
the benefit of Messrs. Finger, Sooy, Davis, Dafferner and Shropshire, as
follows: $372, $372, $372, $362 and $317. Amounts indicated in this
column for both 1993 and 1992 are derived from similar employer
profit-sharing contributions, 401(k) thrift plan matching employer
contributions and term life insurance premiums.
</TABLE>
1994 SAR GRANTS. The SAR Committee did not grant any SAR Units to the
named executive officers for the fiscal year-ended December 31, 1994.
The SAR Committee anticipates awarding SAR units during 1995 following
the completion of an evaluation of the SAR Plan by an independent
compensation consultant.
1994 SAR EXERCISES AND YEAR-END SAR VALUES. None of the SARs which
have been granted to the named executive officers pursuant to the 1991
Charter Bancshares, Inc. Stock Appreciation Rights Plan have been
exercised. Because participants are only entitled to receive a cash
settlement upon exercise of any vested SARs under the terms of the SAR
Plan based upon the fair value of Charter's Common Stock as determined
by the SAR Committee at the time of exercise, there are no securities
which underlie the unexercised SARs and, therefore, such information is
inapplicable and has been omitted. The following table provides
information on the value of unexercised in-the-money SAR Units at
December 31, 1994, for those SAR Units which have been granted to the
named executive officers pursuant to the 1991 Charter Bancshares, Inc.
Stock Appreciation Rights Plan (see succeeding section "Executive
Compensation--Stock Appreciation Rights Plan for a description of the
SAR Plan). The in-the-money values for the SAR Units which were granted
to the named executive officers in 1991 and 1992 were determined based
upon the difference between (i) the exercise prices for such SAR Units
of $5.57 and $6.67, respectively (except for an exercise price of $7.04
for the SAR Units which were granted to Mr. Dafferner in 1993) and (ii)
the fully diluted book value per share of $7.99 for Charter's Common
Stock as of December 31, 1994.
SAR EXERCISES IN LAST FISCAL YEAR AND FY-END SAR VALUES
<TABLE>
<CAPTION>
=================================================================
Value of Unexercised
In-the-Money
SAR Units at
Fiscal Year End
Name Exercisable/Unexercisable
-----------------------------------------------------------------
<S> <C>
Jerry E. Finger (1) -
Thomas C. Sooy $10,084/$6,725
-----------------------------------------------------------------
Winston C. Davis $10,084/$6,725
-----------------------------------------------------------------
Michael S. Dafferner $2,095/$8,379
-----------------------------------------------------------------
William S. Shropshire, Jr. $9,569/$7,348
=================================================================
<FN>
(1) In light of his substantial stock ownership position in Charter
and his service as an ex-officio member on the Stock Appreciation
Rights Committee of the Board of Directors, Mr. Finger is not presently
eligible to receive SAR Units.
</TABLE>
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS.
Pursuant to the terms upon which Mr. Dafferner was hired, in the event
that he is terminated prior to March 1, 1998 for any reason other than
cause (which covers death, permanent disability or fraud or dishonesty),
Mr. Dafferner is entitled to an amount equal to 12 months of his then
current base salary, provided, however, that such obligation ceases if
Mr. Dafferner obtains full-time employment during such 12 month period.
In addition, if he voluntarily resigns or is terminated other than for
cause within 12 months following a "change of control," Mr. Dafferner is
entitled to a lump sum payment equal to 1.5 times his then current
annual base salary, less the value of all vested SAR Units which he has
been granted.
13
<PAGE>
MANAGEMENT INCENTIVE COMPENSATION PLAN. On March 21, 1991, the
Board of Directors of Charter adopted the Charter Bancshares, Inc.
Management Incentive Compensation Plan (the "Incentive Plan") to assist
Charter and its subsidiary banks in attracting, rewarding and retaining
well-qualified and productive executive, management and administrative
officers. The Incentive Plan reflects the intentions of Charter's Board
of Directors to more closely align the compensation of Charter's
executive, management and administrative officers to Charter's financial
performance and to recognize their contributions to increases in
shareholder value. The Incentive Plan became effective for the fiscal
year commencing January 1, 1991 and is administered by the MICP
Committee, the members of which are not eligible to receive awards under
the Incentive Plan. The MICP Committee annually determines the employees
who are eligible to participate in the Incentive Plan and the amount of
the incentive awards, if any, to be made to eligible participants under
the Incentive Plan. In accordance with the terms of the Incentive Plan,
the eligible participants are divided into different groups
("Participant Groups") based upon each participant's position within the
Charter organization. These Participant Group classifications determine
the pro forma amount of each participant's base salary, if any, to be
allocated to the incentive pool. Under the terms of the Incentive Plan,
no incentive awards may be made with respect to any fiscal year in which
either (i) the return on Charter's common shareholders' equity is less
than ten percent (10%) or (ii) Charter's consolidated net earnings are
less than seventy-five percent (75%) of the consolidated net earnings
reflected in the annual consolidated budget approved by the Board of
Directors of Charter. Assuming each of these conditions is met for a
particular fiscal year, the size of the incentive pool will be
determined pursuant to a graduated schedule approved annually by the
MICP Committee and the disinterested members of the Board of Directors,
which schedule varies the pro forma amount of each participant's base
salary allocated to the incentive pool depending upon each participant's
Participant Group and the return on Charter's common shareholders'
equity (the "Incentive Pool Schedule"). If the return on Charter's
common shareholders' equity exceeds the maximum amount reflected in the
Incentive Pool Schedule, the MICP Committee may increase the incentive
pool, subject to approval by the disinterested members of the Board of
Directors. Pursuant to the Incentive Pool Schedule approved by the MICP
Committee for 1994 and the 16.93% return on Charter's common
shareholder's equity (which for purposes of the Incentive Plan means
consolidated net earnings for 1994, less dividends paid on the Preferred
Stock in 1994, divided by Charter's common shareholder's equity as of
December 31, 1993), the aggregate amount of the incentive pool created
and awards made under the terms of the Incentive Plan for 1994 was
approximately $577,000 (the "1994 Incentive Pool"). The average
percentage amount of the combined base salaries of all participants
allocated to the 1994 Incentive Pool was approximately 17%.
STOCK APPRECIATION RIGHTS PLAN. During 1991, the 1991 Charter
Bancshares, Inc. Stock Appreciation Rights Plan (the "SAR Plan") was
adopted and approved by the Board of Directors and shareholders of
Charter. The SAR Plan authorizes the issuance of up to 434,108 SAR
Units as adjusted in accordance with the terms of the SAR Plan for three
5% stock dividends paid on Charter's Common Stock since adoption of the
SAR Plan. The Board of Directors believes that the SAR Plan offers a
continuing long-term incentive to key executive officers and managers of
Charter and its subsidiaries, more closely correlates executive
compensation with increases in shareholder value, and should enable
Charter to maintain a competitive position to attract and retain key
executive and management personnel. The SAR Plan is administered by the
SAR Committee, the responsibilities of which include determining the
eligible participants under the plan and the quantity, duration and
other terms and conditions of the SAR Units, as well as the value of the
Common Stock underlying the SAR Units both at the date of grant and the
date of exercise. On May 16, 1991 and October 1, 1992, respectively,
78,000 SAR Units (the "1991 Units") and 47,500 SAR Units (the "1992
Units") were awarded to eligible participants under the SAR Plan. In
addition, 10,000 SAR Units (the "1993 Units") were awarded to Mr.
Dafferner in February, 1993 in connection with his hiring. The fair
value of the outstanding SAR Units has been fixed by the SAR Committee
at $5.57 for the 1991 Units, $6.67 for the 1992 Units and $7.04 for the
1993 Units, such amounts representing the fully diluted book value per
share of Charter's Common Stock as of the month end preceding the
respective dates of grant. All of the outstanding SAR Units are subject
to a five-year vesting schedule with twenty percent vesting on January
1st of each year. The SAR Units are subject to (i) automatic vesting
upon the occurrence of certain events, including death, disability, a
permitted termination of employment, a change in control event, and
liquidation of Charter, and (ii) forfeiture upon the occurrence of
certain events, including an unpermitted termination of employment. At
January 2, 1995, after giving effect to forfeitures of SAR Units under
the terms of the SAR Plan and as a result of the stock dividend
adjustments described above, there were (i) 55,078 1991 Units
outstanding, of which approximately 44,062 1991 Units had fully vested,
(ii) 23,702 1992 Units outstanding, of which 14,222 1992 Units had fully
vested, and (iii) 11,025 1993 Units outstanding, of which 4,410 1993
Units had fully vested. At January 2, 1995, 13,796 1991 Units and 16,958
1992 Units had been exercised by certain participants prior to
terminating their employment with Charter. At January 2, 1995, 26,726
1991 Units, 13,755 1992 Units and no 1993 Units had been forfeited as a
result of an unpermitted event of termination or a permitted event of
termination prior to fully vesting. In accordance with generally
accepted accounting principles, Charter has recognized a charge to
earnings for the fiscal year ended December 31, 1994 with respect to the
outstanding SAR Units, based upon the adjusted book value per share of
Charter's Common Stock as of December 31, 1994. Charter will continue
to reflect charges and credits to earnings for fluctuations in the fair
value of Charter's Common Stock subsequent to December 31, 1994.
14
<PAGE>
PROFIT-SHARING PLAN. Charter and its subsidiary banks participate
in a Profit-Sharing Plan ("Plan") that covers all full-time employees,
provided that they first must become eligible to participate by serving
1,000 hours of employment within a calendar year. Each subsidiary bank
may make contributions based upon net earnings, which amount is
allocated among employees based upon salary level and length of service.
Vesting begins after three years of employment, with full vesting
occurring after seven years or upon death, retirement, or total and
permanent disability. Pursuant to an amendment of the Plan during 1987,
the foregoing vesting schedule supersedes the prior schedule that
provided vesting began after four years, with full vesting to occur
after eleven years. Outside directors do not participate in the Plan.
For the fiscal year ended December 31, 1994, a contribution of
approximately $363,000 was made to the Plan, as compared to $310,000 for
the fiscal year ended December 31, 1993.
During 1987 Charter adopted and incorporated into the Plan a thrift
plan qualified pursuant to Section 401(k) of the Internal Revenue Code
of 1986, as amended. Under the thrift plan an employee, after specified
periods of service, may contribute up to 10% of his or her base
compensation to the thrift plan, with up to 6% of any salary reduction
contribution by the employee then being matched a minimum of 15% by
Charter or such greater amount as the Board of Directors may, in its
discretion, determine. Amounts needed to fund this matching
contribution, which as of January 1, 1988 was set at 25% of the
employee's contribution, are drawn first from amounts retained in the
plan due to employee forfeitures. Accordingly, $10,000 of approximately
$78,000 in matching contributions during 1994 were funded from
forfeitures with the remaining $68,000 being charged as an expense by
Charter or the appropriate subsidiary bank. At December 31, 1994, 198
of 301 full-time eligible employees were participating in the thrift
plan.
EXECUTIVE DEFERRED COMPENSATION PLAN. Effective January 1, 1982,
the Board of Directors of Charter established a deferred compensation
plan for members of its executive management and selected members of
senior management of its subsidiary banks. Contributions were made to
the Deferred Plan in the 1982 and 1983 plan years. Since Mr. Finger
does not participate in the SAR Plan and his ability to make
contributions to the 401(k) thrift plan are limited by applicable law,
in order to bring Mr. Finger's total compensation to a level
commensurate with his position and performance, the Compensation
Committee has authorized two contributions to Mr. Finger's Deferred Plan
account of $14,324 effective as of January 1, 1993 and January 1, 1994,
respectively, which amount represented five percent of Mr. Finger's 1993
and 1994 base salaries. Except for 1982, 1983, 1993 and 1994, no
further contributions have been made to the Deferred Plan. Employer
contributions which were made under the Deferred Plan in 1982 have been
vested over a five-year period. Contributions under the Deferred Plan
for the 1983 plan year have been vested over a four-year period
beginning January 1, 1984, with increases in the amounts contributed to
be equivalent to the rate of increase in the book value of Charter's
Common Stock over such period. Similarly, the contribution to Mr.
Finger's Deferred Plan account for the 1993 and 1994 plan year will be
vested over a three-year period beginning January 1, 1994 and January 1,
1995, respectively, with increases in the amounts contributed to be
equivalent to the rate of increase in the book value of Charter's Common
Stock over such period. In the event there is no increase in the book
value of Charter's Common Stock over the applicable period, the
undistributed balance held under the Deferred Plan earns at a rate equal
to Charter's current federal funds borrowing rate. Unless deferred
further by an eligible employee, the 1982 Deferred Plan amounts were
paid to eligible employees in a lump sum payment in 1988 and were
deductible by Charter at that time. As of December 31, 1994, the
contributions to the Deferred Plan for plan years 1982 and 1983 and
earnings thereon have fully vested and have been distributed to all
employee participants, except for Mr. Finger who has elected to defer
distribution of his account balance and earnings thereon through
December 31, 1995, at which time he may elect to further defer such
payment. At December 31, 1994, Mr. Finger had an account balance of
approximately $191,000, which includes accrued earnings of approximately
$10,800 for 1994.
DIRECTOR COMPENSATION. Each director who is not also an officer of
Charter or NationsBank, or who has been designated by NationsBank as a
nominee for election to the Board of Directors, receives compensation
for his services as a director in the amount of $850 for each meeting of
the board and $400 for any committee of the board which he attends. Mr.
Gentry is reimbursed by Charter for his actual out-of-pocket expenses
incurred in attending Charter's board meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Except
for Mr. Finger who is an ex-officio member of the Compensation Committee
(as well as the SAR Committee), no member of the Compensation Committee
(or the SAR Committee or MICP Committee) was an officer or employee of
Charter or any of its subsidiaries during 1994, or was formerly an
officer of Charter or any of its subsidiaries or had any relationship
requiring disclosure by Charter pursuant to applicable SEC rules. Mr.
Finger's ex-officio status on the Compensation Committee (and the SAR
Committee) does not entitle him to vote on matters submitted to a vote
of such committees but enables him to provide advice and consultation on
compensation matters affecting Charter and its officers and employees.
During 1994, no executive officer of Charter or any subsidiary
served as (i) a member of the compensation committee (or other board
committee performing equivalent functions) of another entity, one of
whose executive officers served on Charter's Compensation Committee,
(ii) a director of another entity, one of whose executive officers
served on Charter's Compensation Committee, or (iii) a member of the
compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served as
a director of Charter.
15
<PAGE>
SHAREHOLDER PROPOSALS
No shareholder proposals were received from any of Charter's
shareholders requesting inclusion in this proxy statement. Proposals of
shareholders for presentation at the 1996 annual meeting of shareholders
must be received by Charter at the address set forth on the cover page
of this proxy statement by January 1, 1996, for consideration for
inclusion in the proxy material.
TRANSACTIONS WITH MANAGEMENT
Some of the officers and directors of Charter and their affiliates
are customers of its subsidiary banks, Investor Services, Charter
Mortgage Company or Charter Venture. Such directors and officers have
had transactions in the ordinary course of business with certain of
these institutions, including borrowings, all of which were on
substantially the same terms and conditions, including interest rates
and collateral, as those prevailing from time to time for comparable
transactions with unaffiliated persons and did not involve more than the
normal risk of collectibility or features unfavorable to Charter's
subsidiaries. Charter expects to continue to enter into such
transactions on similar terms and conditions in the future.
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 Charter's directors and executive officers, and persons who
beneficially own more than ten percent of a registered class of equity
securities, to file reports of beneficial ownership and changes in
beneficial ownership on Forms 3, 4 and 5 (collectively, "SEC Forms")
with the SEC and the National Association of Securities Dealers, Inc.
Directors, executive officers and ten percent beneficial owners are
required under regulations promulgated by the SEC to furnish Charter
with copies of all SEC Forms which they file.
Based solely on information provided to Charter by its directors,
executive officers and ten percent beneficial owners, Charter believes
that its directors, executive officers and ten percent beneficial owners
have complied with all filing requirements applicable to them with
respect to transactions occurring during 1994.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has not yet selected an independent certified
public accounting firm to audit the consolidated financial statements of
Charter and its subsidiaries for the year ending December 31, 1995.
Deloitte & Touche has served as independent auditors to Charter since
its inception in 1978, as well as to Charter-Houston and
Charter-Colonial since 1976. Charter is advised that no member of
Deloitte & Touche has any direct financial interest or material indirect
financial interest in Charter or any of its subsidiaries or, during the
past three years, has had any connection with Charter or its
subsidiaries in the capacity of promoter, underwriter, voting trustee,
director, officer or employee. Representatives of Deloitte & Touche are
expected to be present at the annual meeting of shareholders and will be
available to respond to appropriate questions addressed to them.
OTHER BUSINESS
The management of Charter does not know of any other matters that
are likely to be brought before the meeting for action. Should,
however, any other matter properly be brought before the meeting, the
persons named in the accompanying proxy will vote at their discretion on
such matters.
/s/ JERRY E. FINGER
---------------------------------
JERRY E. FINGER
Chairman
Houston, Texas
April 7, 1995
16
<PAGE>
Charter has included as part of its 1994 Annual Report to
Shareholders enclosed with this proxy statement a copy without exhibits
of the annual report of Charter on Form 10-K for the year ended December
31, 1994, as filed with the Securities and Exchange Commission. Copies
of the exhibits described in the Form 10-K are available to anyone who
was a shareholder of record of Charter as of March 1, 1995, at a charge
of $1.00 per page, minimum of $25.00 each. Requests should be directed
to: Michael A. Roy, Secretary, Charter Bancshares, Inc., 2600 Citadel
Plaza Drive, Suite 600, Houston, Texas 77008.
17
<PAGE>
CHARTER BANCSHARES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR AN ANNUAL MEETING APRIL 27, 1995
PROXY
The undersigned hereby appoints Jerry E. Finger, Winston C. Davis and Michael
A. Roy, or any of them, each with power of substitution, the proxies of the
undersigned, to vote the stock of the undersigned, whether Common, Special
Common or Preferred Stock, at the annual meeting of shareholders of Charter
Bancshares, Inc. to be held April 27, 1995, and at any adjournment thereof as
follows:
I DIRECTORS. To elect as directors the nominees (change of address)
listed below.
Andrew M. Alexander, Donald R. Collins, Winston __________________________
C. Davis, Jerry E. Finger, Frank L. Gentry,
William M. Hatten, R. Steve Letbetter, Herschel __________________________
G. Maltz, W. J. Smith, Jr.
__________________________
II OTHER BUSINESS. To vote in their discretion with
respect to any other business that may properly __________________________
come before the meeting. (If you have written in
the above space, please
mark the corresponding box
on the reverse side of
this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE
REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE
SIDE
<PAGE>
/X/ Please mark your
votes as in this
example.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. As such proxies may / / / / / /
Directors in their discretion
(see reverse) determine upon such
other matters as may
properly come before
the meeting.
For, except vote withheld from the
following nominee(s):
__________________________________
Change
of / /
Address
Attend
Meeting / /
SIGNATURE(S)________________________________________________ DATE______________
SIGNATURE(S)________________________________________________ DATE______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
