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OMB APPROVAL
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OMB Number:
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3235-0059
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Expires:
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February 28, 2006
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Estimated average burden
hours per
response
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12.75
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
x
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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x
Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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TEXAS CAPITAL 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):
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x
No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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.
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1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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SEC 1913 (11-01)
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Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number.
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April 15, 2005
Dear TCBI Shareholder:
I am pleased to present your company’s 2004 annual report.
Additionally, earnings releases, performance information and
corporate governance may be found in the investor section of the
Company’s website at www.TexasCapitalBank.com.
I would also like to invite you to attend the Annual Meeting of
Shareholders of Texas Capital Bancshares, Inc., the holding
company for Texas Capital Bank, National Association:
Tuesday, May 17, 2005
10:00 a.m.
2100 McKinney Avenue, 9th Floor
Dallas, Texas 75201
214.932.6600
The attached Notice of Annual Shareholders’ Meeting
describes the formal business to be transacted at the Annual
Meeting. Certain directors and officers will be present at the
meeting and will be available to answer any questions you may
have.
We encourage you to review carefully the accompanying materials
and sign, date, and return the enclosed proxy card promptly. If
you attend the Annual Meeting, you may vote in person, even if
you have previously mailed a proxy.
On behalf of the board of directors and all the employees of
Texas Capital Bancshares, Inc., and its operating entities,
thank you for your continued support.
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Sincerely,
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Joseph M. Grant
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Chairman and Chief Executive Officer
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TEXAS CAPITAL BANCSHARES, INC.
2100 McKinney Avenue
9th Floor
Dallas, Texas 75201
NOTICE OF ANNUAL STOCKHOLDERS’ MEETING
To be held May 17, 2005
NOTICE IS HEREBY GIVEN
that the annual stockholders’
meeting (the “Annual Meeting”) of Texas Capital
Bancshares, Inc. (the “Company”), a Delaware
corporation, and the holding company for Texas Capital Bank,
National Association, will be on Tuesday, May 17, 2005, at
10:00 a.m. at the offices of the Company located at 2100
McKinney Avenue, 9th Floor, Dallas, Texas 75201.
A proxy statement and proxy card for this Annual Meeting are
enclosed. The Annual Meeting is for the purpose of considering
and voting upon the following matters:
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1.
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election of fourteen (14) directors for terms of one year
each or until their successors are elected and qualified,
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2.
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approval of the Company’s 2005 Long-Term Incentive
Plan, and
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3.
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to transact such other business as may properly come before the
Annual Meeting or any postponements or adjournments thereof.
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Information about the matters to be acted upon at the Annual
Meeting is set forth in the accompanying proxy statement.
Stockholders of record at the close of business on
March 28, 2005 are the only stockholders entitled to notice
of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual
Meeting in person. Whether you expect to attend the Annual
Meeting or not, please vote, sign, date and return the enclosed
proxy in the enclosed self-addressed envelope as promptly as
possible. If you attend the Annual Meeting, you may vote your
shares in person, even though you have previously signed and
returned your proxy.
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By order of the board of directors,
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Larry A. Makel
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Secretary
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April 15, 2005
Dallas, Texas
PROXY STATEMENT
TABLE OF CONTENTS
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A-1
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i
TEXAS CAPITAL BANCSHARES, INC.
2100 McKinney Avenue
9th Floor
Dallas, Texas 75201
PROXY STATEMENT
FOR THE ANNUAL STOCKHOLDERS’ MEETING
ON MAY 17, 2005
MEETING INFORMATION
This proxy statement is being furnished to Texas Capital
Bancshares, Inc. (the “Company”) stockholders on
April 15, 2005, in connection with the solicitation of
proxies by the board of directors to be voted at the annual
stockholders’ meeting (the “Annual Meeting”). The
Annual Meeting will be held on May 17, 2005, at
10:00 a.m. at the offices of the Company located at
2100 McKinney, 9th Floor, Dallas, Texas 75201. The
Company is the parent corporation of Texas Capital Bank,
National Association (the “Bank”).
The purpose of the Annual Meeting is to consider and vote upon:
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1.
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election of fourteen (14) directors for terms of one year
each or until their successors are elected and qualified,
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2.
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approval of the Company’s 2005 Long-Term Incentive Plan
(“2005 Incentive Plan”), and
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3.
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to transact such other business as may properly come before the
Annual Meeting or any postponements or adjournments thereof.
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RECORD DATE AND VOTING SECURITIES
You are entitled to one vote for each share of voting common
stock you own.
Your proxy will be voted in accordance with the directions you
specify in the proxy. If you do not provide directions in the
proxy but sign the proxy and return it, your proxy will be voted
(a) FOR each of the nominees for director named in the
proxy statement, (b) FOR approval of the
2005 Incentive Plan and (c) in the discretion of the
proxy holders, for any other proposals that properly come before
the Annual Meeting.
Only those stockholders that owned shares of the Company’s
voting common stock on March 28, 2005, the record date
established by the board of directors, will be entitled to vote
at the Annual Meeting. At the close of business on the record
date, there were 25,557,896 shares of voting common stock
outstanding held by 546 identified holders.
QUORUM AND VOTING
In order to have a quorum to transact business at the Annual
Meeting, at least a majority of the total number of issued and
outstanding shares of common stock must be present at the Annual
Meeting, in person or by proxy. If there are not sufficient
votes for a quorum or to approve any proposal at the time of the
Annual Meeting, the board of directors may postpone or adjourn
the Annual Meeting in order to permit the further solicitation
of proxies. Abstentions and broker non-votes will be counted
toward a quorum but will not be counted in the votes for each of
the proposals presented at the Annual Meeting.
SOLICITATION AND VOTING OF PROXIES
It is important that you are represented by proxy or are present
in person at the Annual Meeting. The Company requests that you
vote by completing the enclosed proxy card and returning it
signed and dated in the enclosed postage paid envelope. Your
proxy will be voted in accordance with the directions you
provide. If you sign, date and return your proxy but do not
provide any instructions, your proxy will be voted FOR each of
the nominees as directors and FOR approval of the 2005 Incentive
Plan.
Other than the election of fourteen (14) directors and
approval of the 2005 Incentive Plan, the Company is not aware of
any additional matters that will be presented for consideration
at the Annual Meeting. However, if any additional matters are
properly brought before the Annual Meeting, your proxy will be
voted in the discretion of the proxy holder.
You may revoke your proxy at any time prior to its exercise by:
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1. filing a written notice of revocation with the secretary
of the Company,
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2. delivering to the Company a duly executed proxy bearing
a later date, or
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3. attending the Annual Meeting, filing a notice of
revocation with the secretary and voting in person.
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A plurality of the votes cast in person or by proxy by the
holders of voting common stock is required to elect a director.
The 14 nominees receiving a plurality of votes cast by the
holders of voting common stock will be elected as directors.
Abstentions and broker non-votes will have no effect on the
outcome of the election of directors, assuming a quorum is
present or represented by proxy at the Annual Meeting. There
will be no cumulative voting in the election of directors.
The vote of a majority of the shares having voting power
represented in person or by proxy is required to approve the
2005 Incentive Plan. Abstentions will have the same legal effect
as a vote against the 2005 Incentive Plan, and broker non-votes
will have no effect on such proposal. A broker non-vote occurs
if a broker or other nominee holder of shares does not have
discretionary authority and has not received voting instructions
with respect to a particular matter.
The Company’s board of directors is making this
solicitation and the Company will pay the costs of this proxy
solicitation. The directors, officers and regular employees of
the Company and the Bank may also solicit proxies by telephone
or in person but will not be paid additional compensation to do
so.
PROPOSALS FOR STOCKHOLDER ACTION
Election of Directors
The Company currently has fourteen (14) directors on the
board of directors. Directors serve a one-year term or until
their successors are elected and qualified. All of the nominees
below currently serve as a director and have indicated their
willingness to continue to serve as a director if elected.
However, if any of the nominees is unable or declines to serve
for any reason, your proxy will be voted for the election of a
substitute nominee selected by the proxy holders.
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Nominees
At the Annual Meeting, the stockholders will elect fourteen
(14) directors. The board of directors recommends a
vote FOR each of the nominees set forth below:
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Name
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Age
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Position
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Joseph M. (Jody) Grant
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Director; Chairman, Chief Executive Officer
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George F. Jones, Jr.
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Director; President and Chief Executive Officer of Texas Capital
Bank, N.A.
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Peter B. Bartholow
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Director; Chief Financial Officer
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Leo Corrigan III
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Director
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Frederick B. Hegi, Jr.
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Director
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James R. Holland, Jr.
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Director
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Larry A. Makel
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Director; Corporate Secretary
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Walter W. McAllister III
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Director
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Lee Roy Mitchell
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Director
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Steve Rosenberg
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Director
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John C. Snyder
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Director
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Robert W. Stallings
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Director
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James Cleo Thompson, Jr.
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Director
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Ian J. Turpin
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Director
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Joseph M. (Jody) Grant
has been the Chairman of the Board
and Chief Executive Officer since the Company commenced
operations in 1998. In addition, he currently serves as the
Chairman of the Board of the Bank. Prior to co-founding the
Company, Mr. Grant served as Executive Vice President,
Chief Financial Officer and a member of the board of directors
of Electronic Data Systems Corporation from 1990 to March 1998.
From 1986 to 1989, Mr. Grant had served as the Chairman and
Chief Executive Officer of Texas American Bancshares, Inc.
George F. Jones, Jr.
has served as the Chief
Executive Officer and President of the Bank since its inception
in December 1998. Mr. Jones was also a founder of Resource
Bank, the predecessor bank. From 1993 until 1995, Mr. Jones
served as an Executive Vice President of Comerica Bank, which
acquired NorthPark National Bank in 1993. From 1986 until
Comerica’s acquisition of NorthPark in 1993, Mr. Jones
served as either NorthPark’s President or President and
Chief Executive Officer.
Peter B. Bartholow
has served as the Chief Financial
Officer since October 6, 2003. Mr. Bartholow had
served as a Managing Partner with Hat Creek Partners, a Dallas,
Texas private equity firm from January 1999 to October 2003.
Prior to joining Hat Creek Partners, he was Vice President of
Corporate Finance of EDS and also served on A.T. Kearney’s
board of directors during that time.
Leo Corrigan III
has been a director since September
2001. He has served as President of Corrigan Securities, Inc., a
real estate investment company since 1972. Mr. Corrigan was
a director of Texas Capital Bank from December 1998 to September
2001.
Frederick B. Hegi, Jr.
has been a director since
June 1999. He has been a partner of Wingate Partners, an
investment company, since he co-founded it in 1987.
Mr. Hegi currently serves as Chairman of the board of
directors of United Stationers, Inc. and as a director of Drew
Industries Incorporated and Lone Star Technologies, Inc.
James R. Holland, Jr.
has been a director since June
1999. He has served as the President and Chief Executive Officer
of Unity Hunt, Inc., a diversified holding company, since 1991.
He has also served as
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Chief Trustee of the Lamar Hunt Trust Estate since 1991.
Mr. Holland currently serves on the board of directors of
Placid Holding Company and International Surface Preparation
Corporation.
Larry A. Makel
has been the Corporate Secretary since the
Company’s formation in 1998 and a director since September
2001. He is a partner and member of the Executive Committee of
Patton Boggs LLP, a national law firm, a position he has held
since June 1997. He was a director of Texas Capital Bank from
December 1998 to September 2001.
Walter W. McAllister III
has been a director since
June 1999. He served as Chairman of the Texas Insurance Agency
Group of Companies, a group of affiliated property and casualty
insurance agencies, from 1992 until his retirement in March 2002.
Lee Roy Mitchell
has served as a director since June
1999. He has served as Chairman of the board of directors and
Chief Executive Officer of Cinemark USA, Inc., a movie theater
operations company, since 1985.
Steven Rosenberg
has served as a director since September
2001. He is President of SPR Ventures, Inc., a private
investment company. He was a director of Texas Capital Bank from
1999 to September 2001.
John C. Snyder
has served as a director since June 1999.
He has also served as Chairman of Snyder Operating Company LLC,
an investment company, since June 2000. From 1977 to 1999,
Mr. Snyder served as Chairman of the Board of Directors and
Chief Executive Officer of Snyder Oil Corporation, an energy
exploration and production company. In 1999, Snyder Oil
Corporation was merged into Santa Fe Snyder Corporation, an
energy exploration and production company, where Mr. Snyder
served as Chairman of the Board of Directors through June 2000
when it was merged into Devon Energy Corporation. He also
currently serves as a director of SOCO International plc, a UK
oil and gas exploration company and advisory director of
4-D Global Energy, a French private equity company, focused
on international energy investments.
Robert W. Stallings
has served as a director since August
2001. He has also served as Chairman of the Board of Directors
and Chief Executive Officer of Stallings Capital Group, an
investment company, since March 2001. From 1991 to 2001,
Mr. Stallings served as Chief Executive Officer of Pilgrim
Capital Group, an investment company. He is currently Executive
Chairman of the Board of Gainsco, Inc.
James Cleo Thompson, Jr.
has been a director since
September 2001. He has served as Chairman of the Board of
Directors and President of Thompson Petroleum Corporation, an
energy exploration and production company since 1978. He was a
director of Texas Capital Bank from 1999 to September 2001.
Ian J. Turpin
has been a director since May 2001. Since
1992, he has served as President and director of The LBJ Holding
Company and various companies affiliated with the family of the
late President of the U.S., Lyndon B. Johnson, which are
involved in radio, real estate, private equity investments and
managing diversified investment portfolios.
The board of directors recommends a vote FOR the
election of each of the nominees.
Approval of 2005 Long-Term Incentive Plan
Upon recommendation of the Human Resources Committee of the
Board of Directors of the Company, the Board of Directors of the
Company has adopted, subject to stockholder approval, the Texas
Capital Bancshares, Inc. 2005 Long-Term Incentive Plan
(hereinafter called the “2005 Incentive Plan”). The
2005 Incentive Plan is intended to enable the Company to remain
competitive and innovative in its ability to attract, motivate,
reward and retain the services of key employees, key
consultants, key contractors and non-employee directors. The
2005 Incentive Plan provides for the granting of stock options,
stock appreciation rights, restricted stock, restricted stock
units, performance awards, dividend equivalent rights, and other
awards which may be paid in cash or stock. The 2005 Incentive
Plan is expected to provide
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flexibility to the Company’s compensation methods in order
to adapt the compensation of key employees to a changing
business environment, after giving due consideration to
competitive conditions and the impact of federal tax laws. The
following is a brief description of the 2005 Incentive Plan. A
copy of the 2005 Incentive Plan is attached as Exhibit A to
this proxy statement, and the following description is qualified
in its entirety by reference to the 2005 Incentive Plan.
It is the judgment of the Board of Directors of the Company that
the 2005 Incentive Plan is in the best interest of the Company
and its stockholders.
Replacement of 1999 Omnibus Stock Plan
The 2005 Incentive Plan will replace the Texas Capital
Bancshares, Inc. 1999 Omnibus Stock Plan (the “1999
Plan”). Subject to shareholder approval of the 2005
Incentive Plan, the board of directors intends to amend the 1999
Plan to prevent the granting of any additional stock awards,
including stock options, under the 1999 Plan. The stock options
and restricted stock units previously granted under the 1999
Plan will continue to remain outstanding until such time as they
are exercised or expire in accordance with the their terms.
Description of the 2005 Incentive Plan
Effective Date and Expiration.
The 2005 Incentive Plan
will become effective on May 17, 2005, subject to and
conditioned upon stockholder approval of the 2005 Incentive
Plan, and will terminate on May 17, 2015. No award may be
made under the 2005 Incentive Plan after its expiration date,
but awards made prior thereto may extend beyond that date.
Share Authorization.
Subject to certain adjustments, the
number of the Company’s common shares that may be issued
pursuant to awards under the 2005 Incentive Plan is
1,500,000 shares. Shares are counted only to the extent
they are actually issued. If shares are issued and reacquired by
the Company, such shares are available for issuance under the
2005 Incentive Plan. Shares tendered in payment of the purchase
price of an award or to satisfy tax withholding obligations or
shares covered by an award that is settled in cash, are
available for awards under the 2005 Incentive Plan.
A maximum of 200,000 shares may be granted in any one year
in the form of any award to any one participant, of which a
maximum of (i) 100,000 shares may be granted to a
participant in the form of stock options or stock appreciation
rights and (ii) 100,000 shares may be granted to a
participant in the form of restricted stock, restricted stock
units, performance awards or other stock based awards.
Administration.
The 2005 Incentive Plan will be
administered by the Human Resources Committee of the Board of
Directors (the “Committee”). Currently, the Committee
is comprised of four independent directors. The Committee may
delegate its duties to a subcommittee or to one or more officers
of the Company as provided in the 2005 Incentive Plan. The
Committee will determine the persons to whom awards are to be
made, determine the type, size and terms of awards, interpret
the 2005 Incentive Plan, establish and revise rules and
regulations relating to the 2005 Incentive Plan and make any
other determinations that it believes necessary for the
administration of the 2005 Incentive Plan.
Eligibility.
Employees (including any employee who is
also a director), consultants, contractors and non-employee
directors of the Company or its subsidiaries whose judgment,
initiative and efforts contributed to or may be expected to
contribute to the successful performance of the Company are
eligible to participate in the 2005 Incentive Plan. As of
March 31, 2005, the Company had 112 employees,
12 directors, and 1 contractor who would be eligible
under the 2005 Incentive Plan.
Stock Options.
The Committee may grant either incentive
stock options qualifying under Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”) or
non-qualified stock options. Recipients of
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stock options may pay the option exercise price in
(i) cash, check, bank draft or money order payable to the
order of the Company, (ii) by delivering to the Company
common shares already owned by the participant having a fair
market value equal to the aggregate option exercise price and
that the participant has not acquired from the Company within
six months prior to the exercise date, (iii) by
delivering to the Company or its designated agent an executed
irrevocable option exercise form together with irrevocable
instructions from the participant to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the
common shares purchased upon the exercise of the option or to
pledge such shares to the broker as collateral for a loan from
the broker and to deliver to the Company the amount of sale or
loan proceeds necessary to pay the purchase price, and
(iv) by any other form of valid consideration that is
acceptable to the Committee in its sole discretion.
Stock options will be exercisable as set forth in the option
agreements pursuant to which they are issued, but in no event
will stock options be exercisable after the expiration of ten
(10) years from the date of grant. Options are not
transferable other than by will or the laws of descent and
distribution, except that the Committee may permit further
transferability of a non-qualified stock option and, unless
otherwise provided in the option agreement, a non-qualified
stock option may be transferred to: one or more members of the
immediate family of the participant; a trust for the benefit of
one or more members of the immediate family of the participant;
a partnership, the sole partners of which are the participant,
members of the immediate family of the participant, and one or
more family trusts; or a foundation in which the participant
controls the management of the assets.
Stock Appreciation Rights.
Stock appreciation rights
(“SARs”) may, but need not, relate to options. A SAR
is the right to receive an amount equal to the excess of the
fair market value of a common share on the date of exercise over
the fair market value of a common share on the date of grant. A
SAR granted in tandem with a stock option will require the
holder, upon exercise, to surrender the related stock option
with respect to the number of shares as to which the SAR is
exercised. The Committee will determine the terms of each SAR at
the time of the grant. Any SAR may not be granted at less than
the fair market value of a common share on the date the SAR is
granted and cannot have a term of longer than ten
(10) years. Distributions to the recipient may be made in
common shares, in cash or in a combination of both as determined
by the Committee.
Restricted Stock and Restricted Stock Units.
Restricted
stock consists of shares that are transferred or sold by the
Company to a participant, but are subject to substantial risk of
forfeiture and to restrictions on their sale or other transfer
by the participant. Restricted stock units are the right to
receive common shares at a future date in accordance with the
terms of such grant upon the attainment of certain conditions
specified by the Committee, which include substantial risk of
forfeiture and restrictions on their sale or other transfer by
the participant. The Committee determines the eligible
participants to whom, and the time or times at which, grants of
restricted stock or restricted stock units will be made, the
number of shares or units to be granted, the price to be paid,
if any, the time or times within which the shares covered by
such grants will be subject to forfeiture, the time or times at
which the restrictions will terminate, and all other terms and
conditions of the grants. Restrictions or conditions could
include, but are not limited to, the attainment of performance
goals (as described below), continuous service with the Company,
the passage of time or other restrictions or conditions.
Performance Awards.
The Committee may grant performance
awards payable in cash or common shares at the end of a
specified performance period. Payment will be contingent upon
achieving pre-established performance goals (as discussed below)
by the end of the performance period. The Committee will
determine the length of the performance period, the maximum
payment value of an award, and the minimum performance goals
required before payment will be made. Subject to Committee
discretion, a performance award will terminate for all purposes
if the participant is not continuously employed by the Company
at all times during the applicable performance period.
6
Other Awards.
The Committee may grant other forms of
awards payable in cash or common shares if the Committee
determines that such other form of award is consistent with the
purpose and restrictions of the 2005 Incentive Plan. The terms
and conditions of such other form of award shall be specified by
the grant. Such other awards may be granted for no cash
consideration, for such minimum consideration as may be required
by applicable law, or for such other consideration as may be
specified by the grant.
Dividend Equivalent Rights.
The Committee may grant a
dividend equivalent right either as a component of another award
or as a separate award. The terms and conditions of the dividend
equivalent right shall be specified by the grant. Dividend
equivalents credited to the holder of a dividend equivalent
right may be paid currently or may be deemed to be reinvested in
additional common shares. Any such reinvestment shall be at the
fair market value at the time thereof. Dividend equivalent
rights may be settled in cash or common shares.
Performance Goals.
Awards of restricted stock, restricted
stock units, performance awards and other awards (whether
relating to cash or common shares) under the 2005 Incentive Plan
may be made subject to the attainment of performance goals
within the meaning of Section 162(m) of the Code that
consist of one or more or any combination of the following
criteria: growth in interest income and expense; net interest
margin; efficiency ratio; growth in non-interest income and
non-interest expense and ratios to earnings assets; net revenue
growth and ratio to earning assets; capital ratios; asset or
liability interest rate sensitivity and gap; effective tax rate;
deposit growth and composition; liquidity management; securities
portfolio (value, yield, spread, maturity, or duration); earning
asset growth and composition (loans, securities); non-interest
income (including, fees, premiums and commissions, loans, wealth
management, treasury management, insurance, funds management);
overhead ratios, productivity ratios (including EA/ FTE, pre-tax
income/ FTE); credit quality measures; return on assets; return
on equity; economic value of equity EVE; compliance ratings;
internal controls; enterprise risk measures (including interest
rate, loan concentrations, portfolio composition, credit
quality, operational measures, compliance ratings, balance
sheet, liquidity, insurance); cash flow; cost; revenues; sales;
ratio of debt to debt plus equity; net borrowing, credit quality
or debt ratings; profit before tax; economic profit; earnings
before interest and taxes; earnings before interest, taxes,
depreciation and amortization; gross margin; earnings per share
(whether on a pre-tax, after-tax, operational or other basis);
operating earnings; capital expenditures; expenses or expense
levels; economic value added; ratio of operating earnings to
capital spending or any other operating ratios; free cash flow;
net profit; net sales; net asset value per share; the
accomplishment of mergers, acquisitions, dispositions, public
offerings or similar extraordinary business transactions; sales
growth; price of the Company’s Common Stock; return on
assets, equity or stockholders’ equity; market share;
inventory levels, inventory turn or shrinkage; or total return
to stockholders (“Performance Criteria”). Any
Performance Criteria may be used to measure the performance of
the Company as a whole or any business unit of the Company and
may be measured relative to a peer group or index. Any
Performance Criteria may include or exclude
(i) extraordinary, unusual and/or non-recurring items of
gain or loss, (ii) gains or losses on the disposition of a
business, (iii) changes in tax or accounting regulations or
laws, or (iv) the effect of a merger or acquisition, as
identified in the Company’s quarterly and annual earnings
releases. In all other respects, Performance Criteria shall be
calculated in accordance with the Company’s financial
statements, under generally accepted accounting principles, or
under a methodology established by the Committee prior to the
issuance of an Award which is consistently applied and
identified in the audited financial statements, including
footnotes, or the Management Discussion and Analysis section of
the Company’s Annual Report on Form 10-K. However, the
Committee may not in any event increase the amount of
compensation payable to an individual upon the attainment of a
Performance Goal.
Adjustments Upon Changes in Capitalization.
The number of
common shares subject to an award may be adjusted by the
Committee, in the manner it deems equitable, in the event that
the Committee determines that any dividend or other
distribution, recapitalization, stock split, reverse stock
split, rights offering,
7
reorganization, merger, consolidation, split-up, split-off,
combination, subdivision, repurchase or exchange of the common
shares or other securities, issuance of warrants or other rights
to purchase common shares or other similar corporate transaction
or event affects the common shares such that the Committee
determines that an adjustment is appropriate to prevent the
dilution or enlargement of the benefits or potential benefits
intended to be made available under the 2005 Incentive Plan.
Amendment or Discontinuance of the Plan.
The Board of
Directors of the Company may, at any time and from time to time,
without the consent of the participants, alter, amend, revise,
suspend or discontinue the 2005 Incentive Plan; provided,
however, that (i) no amendment that requires stockholder
approval in order for the 2005 Incentive Plan and any awards
under the 2005 Incentive Plan to continue to comply with
Sections 162(m), 421, and 422 of the Code or any applicable
requirements of any securities exchange or inter-dealer
quotation system on which the Company’s stock is listed or
traded, shall be effective unless such amendment is approved by
the requisite vote of the Company’s stockholders entitled
to vote on the amendment; and (ii) unless required by law,
no action by the Board of Directors of the Company regarding
amendment or discontinuance of the 2005 Incentive Plan may
adversely affect any rights of any participants or obligations
of the Company to any participants with respect to any
outstanding award under the 2005 Incentive Plan without the
consent of the affected participant.
Plan Benefits.
Future benefits under the 2005 Incentive
Plan are not currently determinable.
Federal Income Tax Consequences.
The following is a brief
summary of certain federal income tax consequences relating to
the transactions described under the 2005 Incentive Plan as set
forth below. This summary does not purport to address all
aspects of federal income taxation and does not describe state,
local or foreign tax consequences. This discussion is based upon
provisions of the Internal Revenue Code of 1986, as amended (the
“Code”) and the treasury regulations issued thereunder
(the “Treasury Regulations”), and judicial and
administrative interpretations under the Code and Treasury
Regulations, all as in effect as of the date hereof, and all of
which are subject to change (possibly on a retroactive basis) or
different interpretation.
New Law Affecting Deferred Compensation.
In 2004, a new
Section 409A was added to the Code to regulate all types of
deferred compensation. If the requirements of Section 409A
of the Code are not satisfied, deferred compensation and
earnings thereon will be subject to tax as it vests, plus an
interest charge at the underpayment rate plus 1% and a 20%
penalty tax. Certain performance awards, stock options, stock
appreciation rights, restricted stock units and certain types of
restricted stock are subject to Section 409A of the Code
and, to the extent the 2005 Incentive Plan is subject to and
does not comply with Section 409A of the Code with respect
to any such award, the 2005 Incentive Plan may be amended to the
extent necessary.
Incentive Stock Options.
A participant will not recognize
income at the time an incentive option is granted. When a
participant exercises an incentive option, a participant also
generally will not be required to recognize income (either as
ordinary income or capital gain). However, to the extent that
the fair market value (determined as of the date of grant) of
the common shares with respect to which the participant’s
incentive options are exercisable for the first time during any
year exceeds $100,000, the incentive options for the common
shares over $100,000 will be treated as nonqualified options,
and not incentive options, for federal tax purposes, and the
participant will recognize income as if the incentive options
were nonqualified options.
In addition to the foregoing, if the fair market value of the
common shares received upon exercise of an incentive option
exceeds the exercise price, then the excess may be deemed a tax
preference adjustment for purposes of the federal alternative
minimum tax calculation. The federal alternative minimum tax may
produce significant tax repercussions depending upon the
participant’s particular tax status.
8
The tax treatment of any common shares acquired by exercise of
an incentive option will depend upon whether the participant
disposes of his or her shares prior to two years after the date
the incentive option was granted or one year after the common
shares were transferred to the participant (referred to as the
“Holding Period”). If a participant disposes of common
shares acquired by exercise of an incentive option after the
expiration of the Holding Period, any amount received in excess
of the participant’s tax basis for such shares will be
treated as short-term or long-term capital gain, depending upon
how long the participant has held the common shares. If the
amount received is less than the participant’s tax basis
for such shares, the loss will be treated as short-term or
long-term capital loss, depending upon how long the participant
has held the shares.
If the participant disposes of common shares acquired by
exercise of an incentive option prior to the expiration of the
Holding Period, the disposition will be considered a
“disqualifying disposition.” If the amount received
for the common shares is greater than the fair market value of
the common shares on the exercise date, then the difference
between the incentive option’s exercise price and the fair
market value of the common shares at the time of exercise will
be treated as ordinary income for the tax year in which the
“disqualifying disposition” occurs. The
participant’s basis in the common shares will be increased
by an amount equal to the amount treated as ordinary income due
to such “disqualifying disposition.” In addition, the
amount received in such “disqualifying disposition”
over the participant’s increased basis in the common shares
will be treated as capital gain. However, if the price received
for common shares acquired by exercise of an incentive option is
less than the fair market value of the common shares on the
exercise date and the disposition is a transaction in which the
participant sustains a loss which otherwise would be
recognizable under the Code, then the amount of ordinary income
that the participant will recognize is the excess, if any, of
the amount realized on the “disqualifying disposition”
over the basis of the common shares.
Non-qualified Stock Options.
A participant generally will
not recognize income at the time a non-qualified option is
granted. When a participant exercises a non-qualified option,
the difference between the option price and any higher market
value of the common shares on the date of exercise will be
treated as compensation taxable as ordinary income to the
participant. The participant’s tax basis for common shares
acquired under a non-qualified option will be equal to the
option price paid for such common shares, plus any amounts
included in the participant’s income as compensation. When
a participant disposes of common shares acquired by exercise of
a non-qualified option, any amount received in excess of the
participant’s tax basis for such shares will be treated as
short-term or long-term capital gain, depending upon how long
the participant has held the common shares. If the amount
received is less than the participant’s tax basis for such
shares, the loss will be treated as short-term or long-term
capital loss, depending upon how long the participant has held
the shares.
Special Rule if Option Price is Paid for in Common
Shares.
If a participant pays the exercise price of a
non-qualified option with previously-owned shares of the
Company’s common shares and the transaction is not a
disqualifying disposition of common shares previously acquired
under an incentive option, the common shares received equal to
the number of common shares surrendered are treated as having
been received in a tax-free exchange. The participant’s tax
basis and holding period for these common shares received will
be equal to the participant’s tax basis and holding period
for the common shares surrendered. The common shares received in
excess of the number of common shares surrendered will be
treated as compensation taxable as ordinary income to the
participant to the extent of their fair market value. The
participant’s tax basis in these common shares will be
equal to their fair market value on the date of exercise, and
the participant’s holding period for such shares will begin
on the date of exercise.
If the use of previously acquired common shares to pay the
exercise price of a non-qualified option constitutes a
disqualifying disposition of common shares previously acquired
under an incentive option, the
9
participant will have ordinary income as a result of the
disqualifying disposition in an amount equal to the excess of
the fair market value of the common shares surrendered,
determined at the time such common shares were originally
acquired on exercise of the incentive option, over the aggregate
option price paid for such common shares. As discussed above, a
disqualifying disposition of common shares previously acquired
under an incentive option occurs when the participant disposes
of such shares before the end of the Holding Period. The other
tax results from paying the exercise price with previously-owned
shares are as described above, except that the
participant’s tax basis in the common shares that are
treated as having been received in a tax-free exchange will be
increased by the amount of ordinary income recognized by the
participant as a result of the disqualifying disposition.
Restricted Stock.
A participant who receives Restricted
Stock generally will recognize as ordinary income the excess, if
any, of the fair market value of the common shares granted as
Restricted Stock at such time as the common shares are no longer
subject to forfeiture or restrictions, over the amount paid, if
any, by the participant for such common shares. However, a
participant who receives Restricted Stock may make an election
under Section 83(b) of the Code within 30 days of the
date of transfer of the common shares to recognize ordinary
income on the date of transfer of the common shares equal to the
excess of the fair market value of such shares (determined
without regard to the restrictions on such common shares) over
the purchase price, if any, of such shares. If a participant
does not make an election under Section 83(b) of the Code,
then the participant will recognize as ordinary income any
dividends received with respect to common shares. At the time of
sale of such shares, any gain or loss realized by the
participant will be treated as either short-term or long-term
capital gain (or loss) depending on the holding period. For
purposes of determining any gain or loss realized, the
participant’s tax basis will be the amount previously
taxable as ordinary income.
Stock Appreciation Rights.
Generally, a participant who
receives a stand-alone SAR will not recognize taxable income at
the time the stand-alone SAR is granted, provided that the SAR
is exempt from or complies with Section 409A of the Code.
If an employee receives the appreciation inherent in the SARs in
cash, the cash will be taxed as ordinary income to the recipient
at the time it is received. If a recipient receives the
appreciation inherent in the SARs in stock, the spread between
the then current market value and the grant price, if any, will
be taxed as ordinary income to the employee at the time it is
received.
In general, there will be no federal income tax deduction
allowed to the Company upon the grant or termination of SARs.
However, upon the exercise of a SAR, the Company will be
entitled to a deduction equal to the amount of ordinary income
the recipient is required to recognize as a result of the
exercise.
Section 409A of the Code will not apply to a SAR if:
(i) the SAR exercise price is not less than the fair market
value of the Company’s stock at the time the SAR is
granted; (ii) the Company’s stock is traded on an
established securities market; (iii) upon exercise of the
SAR, the participant can only receive common stock of the
Company and (iv) the SAR does not include any deferral
feature other than the deferral of income from the grant date
until the exercise date.
Other Awards.
In the case of an award of restricted stock
units, performance awards, dividend equivalent rights or other
stock or cash awards, the recipient will generally recognize
ordinary income in an amount equal to any cash received and the
fair market value of any shares received on the date of payment
or delivery, provided that the award is exempt from or complies
with Section 409A of the Code. In that taxable year, the
Company will receive a federal income tax deduction in an amount
equal to the ordinary income which the participant has
recognized.
Federal Tax Withholding.
Any ordinary income realized by
a participant upon the exercise of an award under the 2005
Incentive Plan is subject to withholding of federal, state and
local income tax and to withholding of the participant’s
share of tax under the Federal Insurance Contribution Act
(“FICA”) and the Federal Unemployment Tax Act
(“FUTA”).
10
To satisfy federal income tax withholding requirements, the
Company will have the right to require that, as a condition to
delivery of any certificate for common shares, the participant
remit to the Company an amount sufficient to satisfy the
withholding requirements. Alternatively, the Company may
withhold a portion of the common shares (valued at fair market
value) that otherwise would be issued to the participant to
satisfy all or part of the withholding tax obligations.
Withholding does not represent an increase in the
participant’s total income tax obligation, since it is
fully credited toward his or her tax liability for the year.
Additionally, withholding does not affect the participant’s
tax basis in the common shares. Compensation income realized and
tax withheld will be reflected on Forms W-2 supplied by the
Company to employees by January 31 of the succeeding year.
Deferred compensation that is subject to Section 409A of
the Code is subject to federal income tax withholding if it does
not conform with the requirements of Section 409A of the
Code by January 1, 2006.
Special Withholding Rules for Incentive Options Exercised
During the Holding Period.
According to Internal Revenue
Service (“IRS”) Notice 2002-47, 2002-28 I.R.B. 97, the
IRS’ current position is that it will not (i) assess
FICA or FUTA taxes upon the exercise of an incentive option or
the disposition of stock acquired by an employee pursuant to the
exercise of an incentive option, and (ii) will not treat
the exercise of an incentive option, or the disposition of stock
acquired by an employee pursuant to the exercise of an incentive
option, as subject to federal income tax withholding. However,
to the extent that a participant recognizes ordinary income due
to the sale of common shares acquired by the exercise of an
incentive option, the participant still must include
compensation in income relating to the disposition of common
shares acquired by the exercise of an incentive option. In
addition, the Company must report on Form W-2 any payment
to an employee (or former employee) that is at least $600 in a
calendar year, even if the payment is not subject to federal
income tax withholding.
Tax Consequences to the Company.
To the extent that a
participant recognizes ordinary income in the circumstances
described above, the Company will be entitled to a corresponding
deduction provided that, among other things, the income meets
the test of reasonableness, is an ordinary and necessary
business expense, is not an “excess parachute payment”
within the meaning of Section 280G of the Code and is not
disallowed by the $1,000,000 limitation on certain executive
compensation under Section 162(m) of the Code.
Million Dollar Deduction Limit and Other Tax Matters.
The
Company may not deduct compensation of more than $1,000,000 that
is paid to an individual who, on the last day of the taxable
year, is either the Company’s chief executive officer or is
among one of the four other most highly-compensated officers for
that taxable year as reported in the Company’s proxy
statement. The limitation on deductions does not apply to
certain types of compensation, including qualified
performance-based compensation. The Company intends that
benefits in the form of stock options, performance awards, stock
appreciation rights, performance-based restricted stock and
restricted stock units and performance based cash payments under
other awards will be constructed so as to constitute qualified
performance-based compensation and, as such, will be exempt from
the $1,000,000 limitation on deductible compensation.
If an individual’s rights under the plan are accelerated as
a result of a change in control and the individual is a
“disqualified individual” under Section 280G of
the Code, the value of any such accelerated rights received by
such individual may be included in determining whether or not
such individual has received an “excess parachute
payment” under Section 280G of the Code, which could
result in (i) the imposition of a 20% Federal excise tax
(in addition to Federal income tax) payable by the individual on
the value of such accelerated rights, and (ii) the loss by
the Company of a compensation deduction.
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The board of directors recommends a vote FOR approval of
the 2005 Incentive Plan.
Other Matters
The Company does not currently know of any other matters that
may come before the Annual Meeting. However, if any other
matters are properly presented at the Annual Meeting, the proxy
holders will vote your proxy in their discretion on such matters.
BOARD AND COMMITTEE MATTERS
Board of Directors
The business affairs of the Company are managed under the
direction of the board of directors. The board of directors
meets on a regularly scheduled basis during the fiscal year of
the Company to review significant developments affecting the
Company and to act on matters requiring approval by the board of
directors. It also holds special meetings as required from time
to time when important matters arise requiring action between
scheduled meetings. The board of directors met seven times
during the 2004 fiscal year. Each director participated in at
least 75% or more of the total number of meetings of the board
of directors.
Director Independence
The board of directors has determined that each director other
than Joseph M. Grant, George F. Jones, Jr.,
Peter B. Bartholow and Larry A. Makel qualifies as an
“Independent Director” as defined in the Nasdaq Stock
Market listing standards and as further defined by recent
statutory and rule changes.
Committees of the Board of Directors and Meeting
Attendance
The board of directors had four standing committees during 2004.
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Executive Committee.
The Executive Committee has the
power to act on behalf of the board of directors and to direct
and manage the business and affairs of the Company whenever the
board of directors is not in session. Executive Committee
members are James R. Holland, Jr. (Chairman), Joseph M.
Grant, Frederick B. Hegi, Jr., Larry A. Makel, and Robert
W. Stallings. During 2004, the Executive Committee met four
times. All members of the Executive Committee participated in at
least 75% of all meetings.
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Nominating Committee.
The Nominating Committee is
comprised of the Independent members of the Executive Committee,
which are James R. Holland, Jr. (Chairman), Frederick B.
Hegi, Jr. and Robert W. Stallings. The Nominating Committee
evaluates and recommends candidates for election as directors,
makes recommendations concerning the size and composition of the
board of directors, develops and implements the Company’s
corporate governance policies, develops specific criteria for
director independence and assesses the effectiveness of the
board of directors. Each member of the Nominating Committee is
an independent director. The Company’s board of directors
has adopted a charter for the Nominating Committee.
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In evaluating and determining whether to nominate a candidate
for a position on the Company’s board of directors, the
Nominating Committee considers high professional ethics and
values, relevant management experience and a commitment to
enhancing stockholder value. In evaluating candidates for
nomination, the Nominating Committee utilizes a variety of
methods. The Nominating Committee regularly assesses the size of
the board of directors, whether any vacancies are expected due
to retirement or otherwise, and the need for particular
expertise on the board of directors. Candidates may come to the
attention of the Nominating Committee from current
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directors, stockholders, professional search firms, officers or
other persons. The Nominating Committee will review all
candidates in the same manner regardless of the source of the
recommendation. The Nominating Committee met once during 2004
and all members were present.
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Audit Committee.
The Company has an Audit Committee
composed of Independent directors that reviews the professional
services and independence of the Company’s independent
registered public accounting firms and its accounts, procedures
and internal controls. The board of directors has adopted a
written charter for the Audit Committee. The Audit Committee
recommends to the board of directors the firm selected to be the
Company’s independent registered public accounting firms
and monitors the performance of such firm, reviews and approves
the scope of the annual audit, reviews and evaluates with the
independent registered public accounting firms the
Company’s annual audit and annual consolidated financial
statements, reviews with management the status of internal
accounting controls, evaluates problem areas having a potential
financial impact on the Company that may be brought to its
attention by management, the independent registered public
accounting firms or the board of directors, and evaluates all of
the Company’s public financial reporting documents. The
Audit Committee is composed of four Independent directors:
Walter W. McAllister III (Chairman), Steve Rosenberg,
Robert W. Stallings, and Ian J. Turpin. During 2004, the Audit
Committee met ten times. All members of the Audit Committee
participated in at least 75% of all meetings.
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Audit Committee Financial Expert.
The board of directors
has determined that each of the four audit committee members is
financially literate under the current listing standards of the
Nasdaq. The board of directors also determined that all members
qualify as “audit committee financial experts” as
defined by the Securities and Exchange Commission
(“SEC”) rules adopted pursuant to the Sarbanes-Oxley
Act of 2002.
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Human Resources Committee.
The Human Resources Committee
is empowered to advise management and make recommendations to
the board of directors with respect to the compensation and
other employment benefits of executive officers and key
employees of the Company. The Human Resources Committee also
administers the Company’s incentive stock option plans for
officers and key employees and the Company’s incentive
bonus programs for executive officers and employees. The Human
Resources Committee members are Frederick B. Hegi, Jr.
(Chairman), James R. Erwin, Lee Roy Mitchell, and John C.
Snyder. During 2004, the Human Resources Committee met four
times. All members of the Human Resources Committee are
independent directors and participated in at least 75% of all
meetings.
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Directors’ Compensation
Directors receive $500 per meeting for board meetings and
committee meetings. Committee chairs receive an additional
$1,000 per year. Upon election to the board of directors
each year, directors are awarded options to
purchase 4,000 shares of the Company’s common
stock. The options are exercisable at the market price on the
date of grant. Options granted during 2001 through 2003 were
fully vested at grant date. Options granted during 2004 were 20%
vested at grant date, with the remaining 80% vesting 20% at a
time at each anniversary of the grant date. Directors are
reimbursed for their travel and reasonable out-of-pocket
expenses incurred by them in performing their duties.
Communications With the Board
Stockholders may communicate with the board of directors,
including the non-management directors, by sending an e-mail to
bod@texascapitalbank.com
or by sending a letter to the
board of directors,
13
c/o Corporate Secretary, 2100 McKinney Avenue,
9th Floor, Dallas, Texas 75201. The Corporate Secretary has
the authority to disregard any inappropriate communications or
to take other appropriate actions with respect to any such
inappropriate communications. If deemed an appropriate
communication, the Corporate Secretary will submit your
correspondence to the Chairman of the board or to any specific
director to whom the correspondence is directed.
Report of the Audit Committee
The Audit Committee’s primary role is to assist the board
of directors in overseeing the Company’s financial
reporting process and related matters. The board of directors
has adopted a written Amended and Restated Charter of the Audit
Committee dated March 16, 2004, a copy of which was filed
with last year’s proxy statement. Each member of the Audit
Committee is “Independent” as defined in
Rule 4200(a)(14) of the listing standards of the Nasdaq
Stock Market, Inc.
The Audit Committee has reviewed and discussed with the
Company’s management and its independent registered public
accounting firms, the audited financial statements of the
Company contained in its Annual Report to Stockholders for the
year ended December 31, 2004.
The Audit Committee has also discussed with the Company’s
independent registered public accounting firms the matters
required to be discussed pursuant to SAS 61 (Communication with
Audit Committees). The Audit Committee has received and reviewed
the written disclosures and the letter from Ernst &
Young LLP required by Independence Standards Standard No. 1
(titled, “Independence Discussions with Audit
Committees”), and has discussed with Ernst & Young
LLP such independent registered public accounting firms’
independence. The Audit Committee has also considered whether
the provision of non-audit services to the Company by
Ernst & Young LLP is compatible with maintaining their
independence.
Based on the review and discussion referred to above, the Audit
Committee recommended to the board of directors that the audited
financial statements be included in the Company’s Annual
Report on Form 10-K for the fiscal year ended
December 31, 2004, filed with the Securities and Exchange
Commission.
This report is submitted on behalf of the Audit Committee.
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|
Walter W. McAllister, Chairperson
|
|
|
Steve Rosenberg
|
|
|
Robert W. Stallings
|
|
|
Ian J. Turpin
|
Code of Ethics
The Company has adopted a code of ethics that applies to all its
employees, including its chief executive officer, chief
financial officer and controller. The Company has made the code
of ethics available on its website at
http://www.texascapitalbank.com
.
14
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information as of March 31,
2005 concerning the beneficial ownership of the Company’s
voting common stock by: (a) each director, director nominee
and executive officer, (b) each person the Company knows to
beneficially own more than 5% of the issued and outstanding
shares of a class of common stock, and (c) all of the
Company’s executive officers and directors as a group. The
persons named in the table have sole voting and investment power
with respect to all shares they owned, unless otherwise noted.
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares of
|
|
|
Percent of Shares of
|
|
|
|
|
Common Stock
|
|
|
Common Stock
|
|
|
Name(1)
|
|
Beneficially Owned
|
|
|
Outstanding
|
|
|
|
|
|
Peter B. Bartholow
|
|
|
48,780
|
(2)
|
|
|
*
|
|
|
C. Keith Cargill
|
|
|
173,284
|
(3)
|
|
|
*
|
|
|
Leo Corrigan III
|
|
|
108,600
|
(4)
|
|
|
*
|
|
|
Joseph M. (Jody) Grant
|
|
|
870,086
|
(5)
|
|
|
3.40
|
%
|
|
Frederick B. Hegi, Jr.
|
|
|
219,118
|
(6)
|
|
|
*
|
|
|
James R. Holland, Jr.
|
|
|
284,636
|
(7)
|
|
|
1.11
|
%
|
|
George F. Jones, Jr.
|
|
|
247,443
|
(8)
|
|
|
*
|
|
|
Larry A. Makel
|
|
|
144,800
|
(9)
|
|
|
*
|
|
|
Walter W. McAllister III
|
|
|
45,600
|
(10)
|
|
|
*
|
|
|
Lee Roy Mitchell
|
|
|
221,818
|
(11)
|
|
|
*
|
|
|
Steve Rosenberg
|
|
|
41,600
|
(12)
|
|
|
*
|
|
|
John C. Snyder
|
|
|
343,600
|
(13)
|
|
|
1.34
|
%
|
|
Robert W. Stallings
|
|
|
146,456
|
(14)
|
|
|
*
|
|
|
James Cleo Thompson, Jr.
|
|
|
181,958
|
(15)
|
|
|
*
|
|
|
Ian J. Turpin
|
|
|
178,938
|
(16)
|
|
|
*
|
|
|
All 15 officers and directors as a group
|
|
|
3,256,717
|
|
|
|
12.59
|
%**
|
|
|
|
|
|
|
|
|
*
|
Less than 1% of the issued and outstanding shares of the class.
|
|
|
|
|
|
|
**
|
Percentage is calculated on the basis of 25,557,896 shares,
the total number of shares of voting common stock outstanding on
March 31, 2005.
|
|
|
|
|
|
|
(1)
|
Unless otherwise stated, the address for each person in this
table is 2100 McKinney Avenue, 9th Floor, Dallas, Texas 75201.
|
|
|
|
|
(2)
|
Includes 38,780 shares held by Mr. Bartholow and
10,000 shares of common stock that may be acquired upon
exercise of options.
|
|
|
|
|
(3)
|
Includes 19,308 shares held by Mr. Cargill and
113,976 shares held by Cargill Lakes Partners, Ltd.
Mr. Cargill is the President of Cargill Lakes
Partners’ general partner, Cargill Lakes, Inc. Includes
40,000 shares of common stock that may be acquired upon
exercise of options.
|
|
|
|
|
(4)
|
Includes 33,000 shares of common stock, held by Corrigan
Securities, Inc., of which Mr. Corrigan is President, and
62,000 shares held by Corrigan Holdings, Inc., of which
Mr. Corrigan is President. Includes 13,600 shares that
may be acquired upon exercise of options.
|
|
|
|
|
(5)
|
Includes 70,000 shares that may be acquired upon exercise
of options and 738,086 shares held by Mr. Grant. Also
includes 62,000 shares which are currently held in
irrevocable trusts and of which Mr. Grant disclaims
beneficial ownership.
|
|
|
|
|
(6)
|
Includes 137,132 shares held by Valley View Capital Corp.
Retirement Savings Trust for the benefit of Mr. Hegi,
24,252 shares held by the F.B. Hegi Trust of which
Mr. Hegi is the beneficiary, and
|
15
|
|
|
|
|
|
|
44,134 shares held directly by Mr. Hegi. Includes
13,600 shares that may be acquired upon exercise of options.
|
|
|
|
|
(7)
|
Includes 271,036 shares held by Hunt Capital Partners, L.P.
of which Mr. Holland is President and Chief Executive
Officer. Also includes 13,600 shares that may be acquired
upon exercise of options that are issued in the name of Hunt
Capital Group, LLC of which Mr. Holland is Chief Executive
Officer.
|
|
|
|
|
(8)
|
Includes 140,918 shares held by G & M Partners
Ltd., of which Mr. Jones is the Managing General Partner,
46,525 shares held directly by Mr. Jones, and
50,000 shares that may be acquired upon exercise of options.
|
|
|
|
|
(9)
|
Includes 107,198 shares held by The Makel Family
Partnership, 1995, Ltd. of which Mr. Makel is the General
Partner, 24,002 shares held by Mr. Makel, and
13,600 shares that may be acquired upon the exercise of
options.
|
|
|
|
|
(10)
|
Includes 32,000 shares held directly by Mr. McAllister
and 13,600 shares that may be acquired upon the exercise of
options.
|
|
|
|
(11)
|
Includes 208,218 shares held by T&LRM Family
Partnership Ltd. Mr. Mitchell is the Chief Executive
Officer of PBA Development, Inc., which is the general partner
of T&LRM. Also includes 13,600 shares that may be
acquired upon exercise of options.
|
|
|
|
(12)
|
Includes 28,000 shares held by Mr. Rosenberg and
13,600 shares that may be acquired upon exercise of options.
|
|
|
|
(13)
|
Includes 180,000 shares held by Snyder Family Investments,
L.P., of which Snyder Operating Company LLC is the general
partner. Mr. Snyder is the President of Snyder Operating
Company LLC. Also, includes 90,000 shares of common stock,
held by the NTS/ JCS Charitable Remainder Unitrust, of which
Mr. Snyder is the trustee and 13,600 shares that may
be acquired upon exercise of options. Also includes
60,000 shares of common stock, held by the Nancy and John
Snyder Foundation. Mr. Snyder disclaims beneficial
ownership of the shares held by the Nancy and John Snyder
Foundation.
|
|
|
|
(14)
|
Includes 132,856 shares of common stock and
13,600 shares that may be acquired upon exercise of options.
|
|
|
|
(15)
|
Includes 38,218 shares held by Mr. Thompson,
42,040 shares held by Big T Investments, of which
Mr. Thompson is the principal, and 74,080 shares held
by J. Cleo Thompson Life Estate Trust, of which
Mr. Thompson is the beneficiary. Also includes
26,020 shares of common stock that are held by the Jean
Christine Thompson Trust II and of which Mr. Thompson
disclaims beneficial ownership. Also includes 1,600 shares
that may be acquired upon exercise of options.
|
|
|
|
(16)
|
Includes 13,792 shares held by Mr. Turpin,
13,614 shares held by Windermere LP, an entity of which
Mr. Turpin can be deemed a controlling person, and
137,932 shares held by LBJ Capital, L.P., an entity of
which Mr. Turpin can be deemed a controlling person. Also
includes 13,600 shares that may be acquired upon exercise
of options.
|
16
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows, for the years ending
December 31, 2004, 2003 and 2002, the cash compensation
paid and other compensation paid or accrued to the Chief
Executive Officer and each of the Company’s three other
most highly compensated executive officers (the “Named
Executives”).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
Underlying
|
|
|
All Other
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock(1)
|
|
|
Options/SARs
|
|
|
Compensation
|
|
|
|
|
|
Joseph M. (Jody) Grant
|
|
|
2004
|
|
|
$
|
300,000
|
|
|
$
|
145,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
Chairman and Chief Executive
|
|
|
2003
|
|
|
$
|
279,167
|
|
|
$
|
55,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
Officer
|
|
|
2002
|
|
|
$
|
275,000
|
|
|
$
|
0
|
|
|
$
|
652,508
|
|
|
|
0
|
|
|
$
|
0
|
|
|
George F. Jones, Jr
|
|
|
2004
|
|
|
$
|
275,000
|
|
|
$
|
128,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
President and Chief Executive
|
|
|
2003
|
|
|
$
|
254,167
|
|
|
$
|
50,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
Officer of Texas Capital Bank
|
|
|
2002
|
|
|
$
|
238,542
|
|
|
$
|
0
|
|
|
$
|
580,000
|
|
|
|
0
|
|
|
$
|
0
|
|
|
Peter B. Bartholow
|
|
|
2004
|
|
|
$
|
250,000
|
|
|
$
|
100,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
Chief Financial Officer
|
|
|
2003
|
|
|
$
|
59,688
|
|
|
$
|
0
|
|
|
$
|
698,750
|
|
|
|
50,000
|
|
|
$
|
62,500
|
(2)
|
|
C. Keith Cargill
|
|
|
2004
|
|
|
$
|
220,000
|
|
|
$
|
83,200
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
Executive Vice President
|
|
|
2003
|
|
|
$
|
203,333
|
|
|
$
|
37,250
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
and Chief Lending Officer
|
|
|
2002
|
|
|
$
|
187,542
|
|
|
$
|
0
|
|
|
$
|
362,500
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
of Texas Capital Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents shares of common stock underlying Restricted Stock
Units (“RSUs”) granted to the Named Executives in
2002. The values of RSUs shown above are based on the market
value of underlying shares of common stock on the grant date of
the RSUs. Each RSU converts into one share of unrestricted
common stock upon vesting. All RSUs vest in 2008, subject to
early-vesting if stock price targets for the common stock are
met. RSUs do not receive any dividends. At December 31,
2004, Mr. Grant held 45,000 RSUs valued at $972,900,
Mr. Jones held 40,000 RSUs valued at $864,800,
Mr. Bartholow held 25,000 RSUs valued at $540,500, and
Mr. Cargill held 25,000 RSUs valued at $540,500. These
values are based on the market value of underlying shares of
common stock on December 31, 2004.
|
|
|
|
(2)
|
Consulting fees paid prior to Mr. Bartholow’s
employment.
|
Fiscal Year-End Option/ SAR Values
The Named Executives did not exercise any of their options
during 2004. The following table sets forth the number and value
of options that the Named Executives owned as of
December 31, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
Underlying Unexercised
|
|
|
Value of Unexercised
|
|
|
|
|
Options/SARs
|
|
|
In-The-Money Options/SARs
|
|
|
|
|
at Fiscal Year-End(1)
|
|
|
at Fiscal Year-End(1)
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
|
|
|
Joseph M. (Jody) Grant
|
|
|
70,000
|
(2)
|
|
|
0
|
|
|
$
|
1,075,900
|
|
|
$
|
0
|
|
|
Peter B. Bartholow
|
|
|
10,000
|
(3)
|
|
|
40,000
|
|
|
$
|
133,700
|
|
|
$
|
534,800
|
|
|
George F. Jones, Jr.
|
|
|
50,000
|
(2)
|
|
|
0
|
|
|
$
|
768,500
|
|
|
$
|
0
|
|
|
C. Keith Cargill
|
|
|
40,000
|
(2)
|
|
|
0
|
|
|
$
|
614,800
|
|
|
$
|
0
|
|
|
|
|
|
(1)
|
Value of options based on a fair market value per share of
$21.62, which is based upon the price as of December 31,
2004.
|
|
|
|
(2)
|
Options issued on October 1, 1998 of which all are
currently exercisable with an exercise price of $6.25 per
share.
|
|
|
|
(3)
|
Options issued on July 9, 2003, of which one-fifth is
currently exercisable and an additional one-fifth of which vests
on July 9, 2005 with an exercise price of $8.25 per
share.
|
17
Non-director Management Biography
Set forth below is the biography of the Company’s executive
officer who is not a member of its board of directors, and his
age and positions as of the date of this Proxy Statement.
C. Keith Cargill
(52) has served as an Executive
Vice President and Chief Lending Officer of the Bank since its
inception in December 1998. Mr. Cargill has more than
20 years of banking experience. He began his banking career
at Texas American Bank in 1977, where he was the manager of the
national corporate lending division of the flagship bank in
Fort Worth. In 1985, Mr. Cargill became President and
Chief Executive Officer of Texas American Bank/ Riverside,
Ft. Worth. In 1989, Mr. Cargill joined NorthPark
National Bank as an Executive Vice President and Chief Lending
Officer. When NorthPark was acquired by Comerica Bank in 1993,
Mr. Cargill joined Comerica as Senior Vice President and
middle market banking manager.
Human Resources Committee Report on Executive Compensation
During 2004, the Human Resources Committee of the board of
directors consisted of the four directors whose names appear
below. Each member of the Human Resources Committee is an
“Independent director” as defined in
Rule 4200(a)(14) of the Nasdaq Stock Market, Inc. This
report describes the elements of the Company’s executive
officer compensation programs and the basis on which 2004
compensation determinations were made by the Human Resources
Committee with respect to the executive officers of the Company,
including the Named Executives.
The Human Resources Committee has the following goals for
compensation programs impacting the executive officers of the
Company and the Bank:
|
|
|
|
|
|
•
|
to provide motivation for the executive officers and to enhance
stockholder value by linking their compensation to the value of
common stock,
|
|
|
|
|
•
|
to retain the executive officers who have led the Company and
the Bank,
|
|
|
|
|
•
|
to allow the Company and the Bank to attract high quality
executive officers in the future by providing total compensation
opportunities consistent with those provided in the industry and
commensurate with the Company’s and the Bank’s level
of performance, and
|
|
|
|
|
•
|
to maintain reasonable “fixed” compensation costs by
targeting base salaries at a competitive average.
|
The executive compensation package available to executive
officers is composed of (a) base salary, (b) annual
bonus awards, and (c) long-term incentive compensation,
including options and stock awards. In order to more effectively
retain the Company’s senior executive officers, the Company
determined it was in the best interest of the Company to
continue to enter into employment agreements with these
officers. Upon expiration of their existing employment
agreements, in December 2004 the Company entered into new
Employment Agreements with Joseph M. Grant, George F.
Jones, Jr., Peter B. Bartholow and C. Keith Cargill. All
are members of the Company’s executive management team. The
Employment Agreements have a term of two years, subject to
renewal and have a compensation package that includes a base
salary and bonus. Also, as part of the compensation paid, each
executive will be eligible to participate in the employee
benefit programs and receive other perquisites generally
available to the Company’s other employees holding
positions similar to that of the executives.
The Human Resources Committee regularly reviews the
Company’s compensation programs to ensure that remuneration
levels and incentive opportunities are competitive and reflect
performance. Factors taken into account in assessing the
compensation of individual officers include the officer’s
performance and contribution to the Company, experience,
strategic impact, external equity or market value, internal
equity
18
or fairness, and retention priority. The various components of
the compensation programs for executive officers are discussed
below.
Base Salary.
In determining salary levels, the Human
Resources Committee considers the entire compensation package
for executive officers, including the equity compensation
provided under stock plans. The Company intends for the salary
levels to be consistent with competitive practices of comparable
institutions and each executive’s level of responsibility.
The Human Resources Committee determines the level of any salary
increase to take effect at the beginning of each fiscal year
after reviewing (a) the qualifications, experience and
performance of the executive officers, (b) the compensation
paid to persons having similar duties and responsibilities in
other institutions, and (c) the size of the bank and the
complexity of its operations. The Human Resources Committee
consulted a survey of compensation paid to executive officers
performing similar duties for depository institutions and their
holding companies, with particular focus on the level of
compensation paid by comparable institutions. The Human
Resources Committee reviews, and if deemed appropriate, adjusts
the base salaries of the Company’s executive officers on a
yearly basis.
Annual Bonus Awards.
In determining bonus awards, the
Human Resources Committee considers the entire compensation
package of the executive officers. The bonus awards are intended
to be consistent with each executive officer’s level of
responsibility and with the competitive practices of comparable
financial institutions. The Human Resources Committee met during
the year to determine bonus compensation paid to the executive
officers of the Company and the Bank during 2004 for 2003
performance. The overall bonus pool is determined based on the
Company’s profitability and achievement of planned
profitability. In 2004, Mr. Grant received a bonus of
$145,000, Mr. Jones received a bonus of $128,000 and
Mr. Cargill received a bonus of $83,200.
Long-term Incentive Compensation.
The Company maintains
its 1999 Omnibus Stock Plan under which employees may receive
discretionary grants and awards as determined and awarded solely
in the discretion of the Human Resources Committee and approved
by the full board. The Human Resources Committee believes that
stock ownership is a significant incentive in aligning the
interests of employees and stockholders and building stockholder
value. In September 2002, the Company granted restricted stock
awards to the following officers: 90,000 shares to Joseph
M. Grant, 80,000 shares to George Jones and
50,000 shares to C. Keith Cargill. In October 2003, the
Company granted a restricted stock award to Peter B. Bartholow
of 53,750 shares. Seventy-five percent of the shares of
restricted stock have vested as of March 31, 2005. However,
as a result of certain deferral agreements, delivery of some
shares has been deferred beyond the vesting date. Pursuant to
Mr. Grant’s deferral agreement, he will receive
67,500 shares on August 2, 2008. However, these shares
have been issued and are being held in a trust of which
Mr. Grant does not have beneficial ownership.
Mr. Jones received 12,000 shares in 2003 and
28,000 shares in 2004. Mr. Bartholow received
28,750 shares in 2004. Mr. Cargill received
7,500 shares in 2003 and 17,500 shares in 2004. In
accordance with APB 25, compensation expense is recognized
for the performance-based awards of restricted stock granted
under the 1999 Omnibus Stock Plan. The Company expensed
approximately $765,000, $430,000 and $91,000 during 2004, 2003
and 2002, respectively, related to these stock awards.
Compensation of the Chief Executive Officer.
After taking
into consideration the factors discussed above, the Human
Resources Committee entered into an Employment Agreement with
Mr. Grant in December 2004 which set his base salary at
$300,000. Pursuant to a deferral agreement, 67,500 of the
restricted stock shares granted to Mr. Grant will be
delivered on August 2, 2008.
The Human Resources Committee does not currently intend to award
compensation that would result in a limitation on the
deductibility of a portion of such compensation pursuant to
Section 162(m) of the Internal Revenue Code of 1986, as
amended, other than awards that may be made under the 1999
Omnibus Stock Plan; however, the Human Resources Committee may
in the future decide to authorize other compensation
19
in excess of the limits of Section 162(m) if it determines
that such compensation is in the best interest of the Company.
This report is submitted on April 6, 2005 by the members of
the Human Resources Committee:
|
|
|
|
|
Frederick B. Hegi, Jr., Chairperson
|
|
|
James R. Erwin
|
|
|
Lee Roy Mitchell
|
|
|
John C. Snyder
|
Human Resources Committee Interlocks and Insider
Participation
None of the executive officers of the Company or the Bank serves
on the Human Resources Committee of the board of directors of
the Company or any Human Resources Committee of any other
company.
Indebtedness of Management and Transactions With Certain
Related Persons
In the ordinary course of business, the Bank has made loans, and
may continue to make loans in the future, to the Bank’s and
the Company’s officers, directors and employees. The Bank
makes all loans to executive officers and directors in the
ordinary course of business, on substantially the same terms as
those with other customers.
In June 2003, the Company committed to invest up to $500,000 in
Blue Sage Investments, LP, a limited partnership approved as a
Small Business Investment Company by the U.S. Small
Business Administration and has invested approximately $100,000
as of December 31, 2004. Blue Sage Investments may be
considered to be an affiliate of Ian J. Turpin, a member of the
Company’s board of directors.
In June 2003, the Company relocated its Austin office to a
building owned by a company that may be considered to be an
affiliate of Ian J. Turpin, a member of the Company’s board
of directors. The lease expense is approximately $145,000
annually.
Larry A. Makel, a member of the Company’s board of
directors and its Corporate Secretary, is a partner in the law
firm Patton Boggs LLP. The Company retains Patton Boggs LLP on a
regular basis to perform legal services.
The Company has entered into indemnification agreements with
each of its directors and officers, which may be broader than
the specific indemnification provisions contained in its
certificate of incorporation, bylaws or under Delaware law.
These indemnification agreements may require the Company, among
other things, to indemnify its officers and directors against
liabilities that may arise by reason of their status or service
as directors or officers. These indemnification agreements also
may require the Company to advance any expenses incurred by the
Company’s directors or officers as a result of any
proceeding against them as to which they could be indemnified.
As of the date of this filing, there is no pending litigation or
proceeding involving any of the Company’s directors,
officers, employees or agents in which indemnification by it is
sought, nor is the Company aware of any threatened litigation or
proceeding that may result in a claim for indemnification. The
Company has purchased a policy of directors’ and
officers’ liability insurance that insures its directors
and officers against the cost of defense, settlement or payment
of a judgment in certain circumstances.
20
Stock Performance Graph
The following table and graph sets forth the cumulative total
stockholder return for the Company’s common stock beginning
on August 12, 2003, the date of the Company’s initial
public offering compared to an overall stock market index
(Russell 2000 Index) and the Company’s peer group index
(Nasdaq Bank Index). The Russell 2000 Index and Nasdaq Bank
Index are based on total returns assuming reinvestment of
dividends.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 12,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2003
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
TCBI
|
|
$
|
100.00
|
|
|
$
|
131.64
|
|
|
$
|
196.55
|
|
|
Russell 2000 Index
|
|
|
100.00
|
|
|
|
119.82
|
|
|
|
141.72
|
|
|
Nasdaq Bank Index
|
|
|
100.00
|
|
|
|
114.54
|
|
|
|
129.93
|
|
The stock performance graph assumes $100.00 was invested on
August 12, 2003.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities and Exchange Act of 1934
requires the Company’s officers and directors, and persons
who own more than 10% of a registered class of its equity
securities, to file initial reports of ownership and reports of
changes in ownership with the SEC. During 2004, based solely on
the Company’s review of theses reports, it believes that
the Company’s Section 16(a) reports were filed timely
by its executive officers and directors, except for
Messrs. Corrigan, Erwin, Makel and Turpin who each filed a
late Form 4.
21
Equity Compensation Plan Information
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|
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|
|
|
|
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|
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Number of
|
|
|
|
|
Number of
|
|
|
|
|
Securities To Be
|
|
|
|
|
Securities
|
|
|
|
|
Issued Upon
|
|
|
Weighted Average
|
|
|
Remaining
|
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Available for
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Future Issuance
|
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Under Equity
|
|
|
Plan Category
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|
and Rights
|
|
|
and Rights
|
|
|
Compensation Plans
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
2,789,480
|
|
|
$
|
8.98
|
|
|
|
563,220
|
|
|
Equity compensation plans not approved by security holders(1)
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84,274
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|
|
|
6.80
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|
|
—
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|
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Total
|
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2,873,754
|
|
|
$
|
8.92
|
|
|
|
563,220
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|
|
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(1)
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Refers to deferred compensation agreement.
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AUDITOR FEES AND SERVICES
A representative of Ernst & Young LLP is expected to be
present at the Annual Meeting and will be available to respond
to appropriate questions.
Fees for professional services provided by the Company’s
independent registered public accounting firms in each of the
last two fiscal years, in each of the following categories (in
thousands) are:
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|
|
|
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|
|
2004
|
|
|
2003
|
|
|
|
|
|
Audit fees
|
|
$
|
521
|
|
|
$
|
432
|
|
|
Audit-related fees
|
|
|
19
|
|
|
|
25
|
|
|
Tax fees
|
|
|
90
|
|
|
|
91
|
|
|
|
|
|
|
$
|
630
|
|
|
$
|
548
|
|
|
|
|
|
Fees for audit services include fees associated with the audit
of the Company’s annual consolidated financial statements,
the reviews of the consolidated financial statements included in
the Company’s Forms 10-Q and the review of its
Form S-3 filed during 2002 and amended during 2003,
accounting consultations and management’s assertions
regarding effective internal controls in compliance with the
requirements of Section 404 of the Sarbanes-Oxley Act and
Federal Deposit Insurance Corporation Improvement Act.
Audit-related fees included but are not limited to procedures
required by the Federal Home Loan Bank in 2003 and 2004.
Tax fees included various federal, state and local tax services.
Pre-approval Policies and Procedures
The Audit Committee has adopted a policy that requires advance
approval of all audit, audit-related and tax services performed
by the independent registered public accounting firm. The policy
provides for pre-approval by the Audit Committee of specifically
defined audit and non-audit services. Unless the specific
service has been previously pre-approved with respect to that
year, the Audit Committee must approve the permitted service
before the independent registered public accounting firm is
engaged to perform it. The Audit Committee has delegated to the
Chairman of the Audit Committee authority to approve permitted
services provided that the Chairman reports any decisions to the
Audit Committee at its next scheduled meeting.
22
ADDITIONAL INFORMATION
Stockholder Nominees for Director
Stockholders may submit nominees for director in accordance with
the Company’s bylaws. Nominations for director for the 2006
annual meeting of stockholders must be delivered no later than
180 days nor more than 270 days prior to the 2006 annual meeting
of stockholders. Nominations should be directed to: Texas
Capital Bancshares, Inc., 2100 McKinney Avenue, 9th Floor,
Dallas, Texas 75201, Attn: Secretary.
Stockholder Proposals for 2006
Stockholders interested in submitting a proposal for inclusion
in the proxy materials for the Company’s annual meeting of
stockholders in 2006 may do so by following the procedures
prescribed in SEC Rule 14a-8. To be eligible for inclusion,
stockholder proposals must be received by the Company at the
following address: Texas Capital Bancshares, Inc.,
2100 McKinney Avenue, 9th Floor, Dallas, Texas 75201,
Attn: Secretary, no later than December 2005.
Advance Notice Procedures
Under the Company’s Bylaws, no business may be brought
before an annual meeting unless it is brought before the meeting
by or at the direction of the Board or by a stockholder who has
delivered timely notice to the Company. Such notice must contain
certain information specified in the Bylaws and be delivered no
later than 180 days nor more than 270 days prior to
the meeting to the following address: Texas Capital Bancshares,
Inc., 2100 McKinney Avenue, 9th Floor, Dallas, Texas
75201, Attn: Secretary. These requirements are separate from the
SEC’s requirements that a stockholder must meet in order to
have a stockholder proposal included in the Company’s proxy
statement pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934.
Annual Report
A copy of the Company’s 2004 Annual Report to Stockholders
accompanies this proxy statement. This report is not part of the
proxy solicitation materials.
Upon written request, the Company will furnish to any
stockholder without charge a copy of its annual report on
Form 10-K for the year ended December 31, 2004. Such
written requests should be directed to Texas Capital Bancshares,
Inc., 2100 McKinney Avenue, 9th Floor, Dallas, Texas
75201, Attn: Secretary.
23
EXHIBIT A
TEXAS CAPITAL BANCSHARES, INC.
2005 LONG-TERM INCENTIVE PLAN
The Texas Capital Bancshares, Inc. 2005 Long-Term Incentive Plan
(the
“Plan”
) was adopted by the Board of
Directors of Texas Capital Bancshares, Inc., a Delaware
corporation (the
“Company”
), effective as of
May 17, 2005, subject to approval by the Company’s
stockholders.
ARTICLE 1
PURPOSE
The purpose of the Plan is to attract and retain the services of
key employees, key contractors, key consultants and Outside
Directors of the Company and its Subsidiaries and to provide
such persons with a proprietary interest in the Company through
the granting of incentive stock options, non-qualified stock
options, stock appreciation rights, restricted stock, restricted
stock units, performance awards, dividend equivalent rights, and
other awards, whether granted singly, or in combination, or in
tandem, that will
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(a) increase the interest of such persons in the
Company’s welfare;
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(b) furnish an incentive to such persons to continue their
services for the Company; and
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(c) provide a means through which the Company may attract
able persons as Employees, Contractors, Consultants and Outside
Directors.
|
With respect to Reporting Participants, the Plan and all
transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the
“1934 Act”
). To the extent any provision
of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void
ab initio,
to the extent
permitted by law and deemed advisable by the Committee.
ARTICLE 2
DEFINITIONS
For the purpose of the Plan, unless the context requires
otherwise, the following terms shall have the meanings indicated:
2.1
“Award”
means
the grant of any Incentive Stock Option, Nonqualified Stock
Option, Reload Option, Restricted Stock, SAR, Restricted Stock
Units, Performance Award, Dividend Equivalent Right or Other
Award, whether granted singly or in combination or in tandem
(each individually referred to herein as an
“Incentive”).
2.2
“Award Agreement”
means a written agreement between a Participant and the
Company which sets out the terms of the grant of an Award.
2.3
“Award Period”
means the period set forth in the Award Agreement during
which one or more Incentives granted under an Award may be
exercised.
2.4
“Board”
means
the board of directors of the Company.
2.5
“Change in
Control”
means any of the following, except as
otherwise provided herein:
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(i) any Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in
the securities beneficially owned by such Person any securities
acquired
|
A-1
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directly from the Company or its Affiliates) representing 51% or
more of the combined voting power of the Company’s then
outstanding securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in
clause (i) of paragraph (iii) below; or
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(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the Effective Date of this Plan, constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company’s stockholders was
approved or recommended by a vote of at least
two-thirds (
2
/
3
)
of the directors then still in office who either were directors
on the Effective Date of this Plan or whose appointment,
election or nomination for election was previously so approved
or recommended; or
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(iii) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with
any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least 51% of the
combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately
after such merger or consolidation or (ii) a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including the securities
Beneficially Owned by such Person any securities acquired
directly from the Company or its Affiliates other than in
connection with the acquisition by the Company or its Affiliates
of a business) representing 51% or more of the combined voting
power of the Company’s then outstanding securities; or
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(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s
assets, other than a sale or disposition by the Company of all
or substantially all of the Company’s assets to an entity,
at least 51% of the combined voting power of the voting
securities of which are owned by stockholders of the Company in
substantially the same proportions as their ownership of the
Company immediately prior to such sale.
|
For purposes hereof:
“Affiliate”
shall have the meaning set forth in
Rule 12b-2 promulgated under Section 12 of the
1934 Act.
“Beneficial Owner”
shall have the meaning set
forth in Rule 13d-3 under the 1934 Act.
“Person”
shall have the meaning given in
Section 3(a)(9) of the 1934 Act, as modified and used
in Sections 13(d) and 14(d) thereof, except that such term
shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any
of its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities or
(iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
Notwithstanding the foregoing provisions of this
Section 2.5
, in the event an Award issued under the
Plan is subject to Section 409A of the Code, then, in lieu
of the foregoing definition and to the extent necessary to
comply with the requirements of Section 409A of the Code,
the definition of “Change in Control” for purposes of
such Award shall be the definition provided for under
Section 409A of the Code and the regulations or other
guidance issued thereunder.
A-2
2.6
“Code”
means
the Internal Revenue Code of 1986, as amended.
2.7
“Committee”
means the Human Resources Committee of the Board, unless the
Board appoints or designates a different committee to administer
the Plan in accordance with
Article 3
of this Plan.
2.8
“Common Stock”
means the common stock, par value $0.01 per share,
which the Company is currently authorized to issue or may in the
future be authorized to issue, or any securities into which or
for which the common stock of the Company may be converted or
exchanged, as the case may be, pursuant to the terms of this
Plan.
2.9
“Company”
means Texas Capital Bancshares, Inc., a Delaware
corporation, and any successor entity.
2.10
“Consultant”
means any person, other than an Employee or a Contractor,
performing advisory or consulting services for the Company or a
Subsidiary, with or without compensation, provided that
bona
fide
services must be rendered by such person and such
services shall not be rendered in connection with the offer or
sale of securities in a capital raising transaction.
2.11
“Contractor”
means any person, who is not an Employee or Consultant,
performing services for the Company or a Subsidiary, with
compensation, pursuant to a written independent contractor
agreement between such person and the Company or a Subsidiary,
provided that
bona fide
services must be rendered by such
person and such services shall not be rendered in connection
with the offer or sale of securities in a capital raising
transaction.
2.12
“Corporation”
means any entity that (i) is defined as a corporation
under Section 7701 of the Code and (ii) is the Company
or is in an unbroken chain of corporations (other than the
Company) beginning with the Company, if each of the corporations
other than the last corporation in the unbroken chain owns stock
possessing a majority of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
For purposes of clause (ii) hereof, an entity shall be
treated as a “corporation” if it satisfies the
definition of a corporation under Section 7701 of the Code.
2.13
“Date of Grant”
means the effective date on which an Award is made to a
Participant as set forth in the applicable Award Agreement;
provided, however, that solely for purposes of Section 16
of the 1934 Act and the rules and regulations promulgated
thereunder, the Date of Grant of an Award shall be the date of
stockholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement.
2.14
“Dividend Equivalent
Right”
means the right of the holder thereof to receive
credits based on the cash dividends that would have been paid on
the shares of Common Stock specified in the Award if such shares
were held by the Participant to whom the Award is made.
2.15
“Employee”
means common law employee (as defined in accordance with the
Regulations and Revenue Rulings then applicable under
Section 3401(c) of the Code) of the Company or any
Subsidiary of the Company.
2.16
“Executive
Officer”
means an officer of the Company or a
Subsidiary subject to Section 16 of the 1934 Act or a
“covered employee” as defined in
Section 162(m)(3) of the Code.
2.17
“Fair Market
Value”
means, as of a particular date, (a) if the
shares of Common Stock are listed on any established national
securities exchange, the closing sales price per share of Common
Stock on the consolidated transaction reporting system for the
principal securities exchange for the Common Stock on that date,
or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so
reported, (b) if the shares of Common Stock are not so
listed but are quoted on the Nasdaq National Market System, the
closing sales price per share of Common Stock on the Nasdaq
National Market System on that date, or, if there shall have
been no such sale so reported on that date, on
A-3
the last preceding date on which such a sale was so reported,
(c) if the Common Stock is not so listed or quoted, the
mean between the closing bid and asked price on that date, or,
if there are no quotations available for such date, on the last
preceding date on which such quotations shall be available, as
reported by Nasdaq, or, if not reported by Nasdaq, by the
National Quotation Bureau, Inc., or (d) if none of the
above is applicable, such amount as may be determined by the
Committee (acting on the advice of an Independent Third Party,
should the Committee elect in its sole discretion to utilize an
Independent Third Party for this purpose), in good faith, to be
the fair market value per share of Common Stock.
2.18
“Independent Third
Party”
means an individual or entity independent of the
Company having experience in providing investment banking or
similar appraisal or valuation services and with expertise
generally in the valuation of securities or other property for
purposes of this Plan. The Committee may utilize one or more
Independent Third Parties.
2.19
“Incentive”
is defined in
Section 2.1
hereof.
2.20
“Incentive Stock
Option”
means an incentive stock option within the
meaning of Section 422 of the Code, granted pursuant to
this Plan.
2.21
“Nonqualified Stock
Option”
means a nonqualified stock option, granted
pursuant to this Plan, which is not an Incentive Stock Option.
2.22
“Option Price”
means the price which must be paid by a Participant upon
exercise of a Stock Option to purchase a share of Common Stock.
2.23
“Other Award”
means an Award issued pursuant to
Section 6.9
hereof.
2.24
“Outside
Director”
means a director of the Company who is not an
Employee or a Consultant.
2.25
“Participant”
means an Employee, Contractor, Consultant or Outside
Director of the Company or a Subsidiary to whom an Award is
granted under this Plan.
2.26
“Plan”
means
this Texas Capital Bancshares, Inc. 2005 Long-Term Incentive
Plan, as amended from time to time.
2.27
“Performance
Award”
means an Award hereunder of cash, shares of
Common Stock, units or rights based upon, payable in, or
otherwise related to, Common Stock pursuant to
Section 6.7
hereof.
2.28
“Performance
Goal”
means any of the goals set forth in
Section 6.10
hereof.
2.29
“Reload Stock
Option”
means a Nonqualified Stock Option or an
Incentive Stock Option granted pursuant to
Section 8.3(c)
hereof.
2.30
“Reporting
Participant”
means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.
2.31
“Restricted
Stock”
means shares of Common Stock issued or
transferred to a Participant pursuant to
Section 6.4
of this Plan which are subject to restrictions or limitations
set forth in this Plan and in the related Award Agreement.
2.32
“Restricted Stock
Units”
means units awarded to Participants pursuant to
Section 6.6
hereof, which are convertible into
Common Stock at such time as such units are no longer subject to
restrictions as established by the Committee.
2.33
“Retirement”
means any Termination of Service solely due to retirement
upon or after attainment of age sixty-five (65), or
permitted early retirement as determined by the Committee.
A-4
2.34
“SAR”
or
“stock appreciation right”
means the right to
receive an amount, in cash and/or Common Stock, equal to the
excess of the Fair Market Value of a specified number of shares
of Common Stock as of the date the SAR is exercised (or, as
provided in the Award Agreement, converted) over the SAR Price
for such shares.
2.35
“SAR Price”
means the exercise price or conversion price of each share
of Common Stock covered by a SAR, determined on the Date of
Grant of the SAR.
2.36
“Stock Option”
means a Nonqualified Stock Option, a Reload Stock Option or
an Incentive Stock Option.
2.37
“Subsidiary”
means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken
chain owns stock possessing a majority of the total combined
voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if
the Company or any corporation described in item (i) above
owns a majority of the general partnership interest and a
majority of the limited partnership interests entitled to vote
on the removal and replacement of the general partner, and
(iii) any partnership or limited liability company, if the
partners or members thereof are composed only of the Company,
any corporation listed in item (i) above or any limited
partnership listed in item (ii) above.
“Subsidiaries” means more than one of any such
corporations, limited partnerships, partnerships or limited
liability companies.
2.38
“Termination of
Service”
occurs when a Participant who is (i) an
Employee of the Company or any Subsidiary ceases to serve as an
Employee of the Company and its Subsidiaries, for any reason;
(ii) an Outside Director of the Company or a Subsidiary
ceases to serve as a director of the Company and its
Subsidiaries for any reason; (iii) a Contractor of the
Company or a Subsidiary ceases to serve as a Contractor of the
Company and its Subsidiaries for any reason; or (iv) a
Consultant of the Company or a Subsidiary ceases to serve as a
Consultant of the Company and its Subsidiaries for any reason.
Except as may be necessary or desirable to comply with
applicable federal or state law, a “Termination of
Service” shall not be deemed to have occurred when a
Participant who is an Employee becomes a Consultant, Contractor,
or Outside Director or vice versa. If, however, a Participant
who is an Employee and who has an Incentive Stock Option ceases
to be an Employee but does not suffer a Termination of Service,
and if that Participant does not exercise the Incentive Stock
Option within the time required under Section 422 of the
Code upon ceasing to be an Employee, the Incentive Stock Option
shall thereafter become a Nonqualified Stock Option.
Notwithstanding the foregoing provisions of this
Section 2.38
, in the event an Award issued under the
Plan is subject to Section 409A of the Code, then, in lieu
of the foregoing definition and to the extent necessary to
comply with the requirements of Section 409A of the Code,
the definition of “Termination of Service” for
purposes of such Award shall be the definition of
“separation from service” provided for under
Section 409A of the Code and the regulations or other
guidance issued thereunder.
2.39
“Total and Permanent
Disability”
means a Participant is qualified for
long-term disability benefits under the Company’s or
Subsidiary’s disability plan or insurance policy; or, if no
such plan or policy is then in existence or if the Participant
is not eligible to participate in such plan or policy, that the
Participant, because of a physical or mental condition resulting
from bodily injury, disease, or mental disorder which prevents
the Participant from performing his or her duties of employment
for a period of six (6) continuous months, as
determined in good faith by the Committee, based upon medical
reports or other evidence satisfactory to the Committee;
provided that
, with respect to any Incentive Stock
Option, Total and Permanent Disability shall have the meaning
given it under the rules governing Incentive Stock Options under
the Code. Notwithstanding the foregoing provisions of this
Section 2.39
, in the event an Award issued under the
Plan is subject to Section 409A of the Code, then, in lieu
of the foregoing definition and to the extent necessary to
comply with the requirements of Section 409A of the Code,
the definition of “Total
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and Permanent Disability” for purposes of such Award shall
be the definition of “disability” provided for under
Section 409A of the Code and the regulations or other
guidance issued thereunder.
ARTICLE 3
ADMINISTRATION
3.1
General Administration;
Establishment of Committee.
Subject to the terms of this
Article 3
, the Plan shall be administered by the
Human Resources Committee of the Board, such other committee of
the Board as is designated by the Board to administer the Plan,
or, if the Board so elects, the Board (the
“Committee”
). The Committee shall consist of
not fewer than two persons. Any member of the Committee may be
removed at any time, with or without cause, by resolution of the
Board. Any vacancy occurring in the membership of the Committee
may be filled by appointment by the Board. At any time there is
no Committee to administer the Plan, any references in this Plan
to the Committee shall be deemed to refer to the Board.
Membership on the Committee shall be limited to those members of
the Board who are “outside directors” under
Section 162(m) of the Code and “non-employee
directors” as defined in Rule 16b-3 promulgated under
the 1934 Act. The Committee shall select one of its members
to act as its Chairman. A majority of the Committee shall
constitute a quorum, and the act of a majority of the members of
the Committee present at a meeting at which a quorum is present
shall be the act of the Committee.
3.2
Designation of Participants
and Awards.
(a) The Committee or the Board shall determine and
designate from time to time the eligible persons to whom Awards
will be granted and shall set forth in each related Award
Agreement, where applicable, the Award Period, the Date of
Grant, and such other terms, provisions, limitations, and
performance requirements, as are approved by the Committee, but
not inconsistent with the Plan. The Committee shall determine
whether an Award shall include one type of Incentive or two or
more Incentives granted in combination or two or more Incentives
granted in tandem (that is, a joint grant where exercise of one
Incentive results in cancellation of all or a portion of the
other Incentive). Although the members of the Committee shall be
eligible to receive Awards, all decisions with respect to any
Award, and the terms and conditions thereof, to be granted under
the Plan to any member of the Committee shall be made solely and
exclusively by the other members of the Committee, or if such
member is the only member of the Committee, by the Board.
(b) Notwithstanding
Section 3.2(a)
, the Board
may, in its discretion and by a resolution adopted by the Board,
authorize one or more officers of the Company (an
“Authorized Officer”
) to (i) designate one
or more Employees as eligible persons to whom Awards will be
granted under the Plan and (ii) determine the number of
shares of Common Stock that will be subject to such Awards;
provided, however, that the resolution of the Board granting
such authority shall (x) specify the total number of shares
of Common Stock that may be made subject to the Awards,
(y) set forth the price or prices (or a formula by which
such price or prices may be determined) to be paid for the
purchase of the Common Stock subject to such Awards, and
(z) not authorize an officer to designate himself as a
recipient of any Award.
3.3
Authority of the
Committee.
The Committee, in its discretion, shall
(i) interpret the Plan, (ii) prescribe, amend, and
rescind any rules and regulations necessary or appropriate for
the administration of the Plan, (iii) establish performance
goals for an Award and certify the extent of their achievement,
and (iv) make such other determinations or certifications
and take such other action as it deems necessary or advisable in
the administration of the Plan. Any interpretation,
determination, or other action made or taken by the Committee
shall be final, binding, and conclusive on all interested
parties. The Committee’s discretion set
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forth herein shall not be limited by any provision of the Plan,
including any provision which by its terms is applicable
notwithstanding any other provision of the Plan to the contrary.
The Committee may delegate to officers of the Company, pursuant
to a written delegation, the authority to perform specified
functions under the Plan. Any actions taken by any officers of
the Company pursuant to such written delegation of authority
shall be deemed to have been taken by the Committee.
With respect to restrictions in the Plan that are based on the
requirements of Rule 16b-3 promulgated under the
1934 Act, Section 422 of the Code, Section 162(m)
of the Code, the rules of any exchange or inter-dealer quotation
system upon which the Company’s securities are listed or
quoted, or any other applicable law, rule or restriction
(collectively,
“applicable law”
), to the extent
that any such restrictions are no longer required by applicable
law, the Committee shall have the sole discretion and authority
to grant Awards that are not subject to such mandated
restrictions and/or to waive any such mandated restrictions with
respect to outstanding Awards.
ARTICLE 4
ELIGIBILITY
Any Employee (including an Employee who is also a director or an
officer), Contractor, Consultant or Outside Director of the
Company whose judgment, initiative, and efforts contributed or
may be expected to contribute to the successful performance of
the Company is eligible to participate in the Plan; provided
that only Employees of a corporation shall be eligible to
receive Incentive Stock Options. The Committee, upon its own
action, may grant, but shall not be required to grant, an Award
to any Employee, Contractor, Consultant or Outside Director of
the Company or any Subsidiary. Awards may be granted by the
Committee at any time and from time to time to new Participants,
or to then Participants, or to a greater or lesser number of
Participants, and may include or exclude previous Participants,
as the Committee shall determine. Except as required by this
Plan, Awards granted at different times need not contain similar
provisions. The Committee’s determinations under the Plan
(including without limitation determinations of which Employees,
Contractors, Consultants or Outside Directors, if any, are to
receive Awards, the form, amount and timing of such Awards, the
terms and provisions of such Awards and the agreements
evidencing same) need not be uniform and may be made by it
selectively among Participants who receive, or are eligible to
receive, Awards under the Plan.
ARTICLE 5
SHARES SUBJECT TO PLAN
5.1
Number Available for
Awards.
Subject to adjustment as provided in
Articles 11 and 12
, the maximum number of shares of
Common Stock that may be delivered pursuant to Awards granted
under the Plan is One Million Five Hundred Thousand
(1,500,000) shares, 100% of which may be delivered pursuant
to Incentive Stock Options. Subject to adjustment pursuant to
Articles 11 and 12
, no Executive Officer may receive
in any calendar year (i) Stock Options or SARs relating to
more than One Hundred Thousand (100,000) shares of Common
Stock, or (ii) Restricted Stock, Restricted Stock Units,
Performance Awards or Other Awards that are subject to the
attainment of Performance Goals relating to more than One
Hundred Thousand (100,000) shares of Common Stock;
provided, however, that all such Awards to any Executive Officer
during any calendar year shall not exceed an aggregate of more
than Two Hundred Thousand (200,000) shares of Common Stock.
Shares to be issued may be made available from authorized but
unissued Common Stock, Common Stock held by the Company in its
treasury, or Common Stock purchased by the Company on the open
market or otherwise. During the term of this Plan, the Company
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will at all times reserve and keep available the number of
shares of Common Stock that shall be sufficient to satisfy the
requirements of this Plan.
5.2
Reuse of Shares.
To the
extent that any Award under this Plan shall be forfeited, shall
expire or be canceled, in whole or in part, then the number of
shares of Common Stock covered by the Award or stock option so
forfeited, expired or canceled may again be awarded pursuant to
the provisions of this Plan. In the event that previously
acquired shares of Common Stock are delivered to the Company in
full or partial payment of the exercise price for the exercise
of a Stock Option granted under this Plan, the number of shares
of Common Stock available for future Awards under this Plan
shall be reduced only by the net number of shares of Common
Stock issued upon the exercise of the Stock Option. Awards that
may be satisfied either by the issuance of shares of Common
Stock or by cash or other consideration shall be counted against
the maximum number of shares of Common Stock that may be issued
under this Plan only during the period that the Award is
outstanding or to the extent the Award is ultimately satisfied
by the issuance of shares of Common Stock. Awards will not
reduce the number of shares of Common Stock that may be issued
pursuant to this Plan if the settlement of the Award will not
require the issuance of shares of Common Stock, as, for example,
a SAR that can be satisfied only by the payment of cash.
Notwithstanding any provisions of the Plan to the contrary, only
shares forfeited back to the Company, shares canceled on account
of termination, expiration or lapse of an Award, shares
surrendered in payment of the exercise price of an option or
shares withheld for payment of applicable employment taxes
and/or withholding obligations resulting from the exercise of an
option shall again be available for grant of Incentive Stock
Options under the Plan, but shall not increase the maximum
number of shares described in
Section 5.1
above as
the maximum number of shares of Common Stock that may be
delivered pursuant to Incentive Stock Options.
ARTICLE 6
GRANT OF AWARDS
6.1
In General.
(a) The grant of an Award shall be authorized by the
Committee and shall be evidenced by an Award Agreement setting
forth the Incentive or Incentives being granted, the total
number of shares of Common Stock subject to the Incentive(s),
the Option Price (if applicable), the Award Period, the Date of
Grant, and such other terms, provisions, limitations, and
performance objectives, as are approved by the Committee, but
not inconsistent with the Plan. The Company shall execute an
Award Agreement with a Participant after the Committee approves
the issuance of an Award. Any Award granted pursuant to this
Plan must be granted within ten (10) years of the date of
adoption of this Plan. The Plan shall be submitted to the
Company’s stockholders for approval; however, the Committee
may grant Awards under the Plan prior to the time of stockholder
approval. Any such Award granted prior to such stockholder
approval shall be made subject to such stockholder approval. The
grant of an Award to a Participant shall not be deemed either to
entitle the Participant to, or to disqualify the Participant
from, receipt of any other Award under the Plan.
(b) If the Committee establishes a purchase price for an
Award, the Participant must accept such Award within a period of
thirty (30) days (or such shorter period as the Committee
may specify) after the Date of Grant by executing the applicable
Award Agreement and paying such purchase price.
(c) Any Award under this Plan that is settled in whole or
in part in cash on a deferred basis may provide for interest
equivalents to be credited with respect to such cash payment.
Interest equivalents may be compounded and shall be paid upon
such terms and conditions as may be specified by the grant.
6.2
Option Price.
The Option
Price for any share of Common Stock which may be purchased under
a Nonqualified Stock Option for any share of Common Stock may
equal to or greater than the Fair Market Value of the share on
the Date of Grant. The Option Price for any share of Common
Stock which may be
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purchased under an Incentive Stock Option must be at least equal
to the Fair Market Value of the share on the Date of Grant; if
an Incentive Stock Option is granted to an Employee who owns or
is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than ten
percent (10%) of the combined voting power of all classes
of stock of the Company (or any parent or Subsidiary), the
Option Price shall be at least 110% of the Fair Market Value of
the Common Stock on the Date of Grant.
6.3
Maximum ISO Grants.
The
Committee may not grant Incentive Stock Options under the Plan
to any Employee which would permit the aggregate Fair Market
Value (determined on the Date of Grant) of the Common Stock with
respect to which Incentive Stock Options (under this and any
other plan of the Company and its Subsidiaries) are exercisable
for the first time by such Employee during any calendar year to
exceed $100,000. To the extent any Stock Option granted under
this Plan which is designated as an Incentive Stock Option
exceeds this limit or otherwise fails to qualify as an Incentive
Stock Option, such Stock Option (or any such portion thereof)
shall be a Nonqualified Stock Option. In such case, the
Committee shall designate which stock will be treated as
Incentive Stock Option stock by causing the issuance of a
separate stock certificate and identifying such stock as
Incentive Stock Option stock on the Company’s stock
transfer records.
6.4
Restricted Stock.
If
Restricted Stock is granted to or received by a Participant
under an Award (including a Stock Option), the Committee shall
set forth in the related Award Agreement: (i) the number of
shares of Common Stock awarded, (ii) the price, if any, to
be paid by the Participant for such Restricted Stock and the
method of payment of the price, (iii) the time or times
within which such Award may be subject to forfeiture,
(iv) specified Performance Goals of the Company, a
Subsidiary, any division thereof or any group of Employees of
the Company, or other criteria, which the Committee determines
must be met in order to remove any restrictions (including
vesting) on such Award, and (v) all other terms,
limitations, restrictions, and conditions of the Restricted
Stock, which shall be consistent with this Plan. The provisions
of Restricted Stock need not be the same with respect to each
Participant.
(a)
Legend on Shares.
Each Participant who is
awarded or receives Restricted Stock shall be issued a stock
certificate or certificates in respect of such shares of Common
Stock. Such certificate(s) shall be registered in the name of
the Participant, and shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such
Restricted Stock, substantially as provided in
Section 15.9
of the Plan. Notwithstanding the
foregoing, the Company may, at its option and in its sole
discretion, retain physical possession of the stock certificate
or certificates evidencing such shares of Common Stock until the
expiration of the restrictions and conditions relating thereto.
(b)
Restrictions and Conditions.
Shares of
Restricted Stock shall be subject to the following restrictions
and conditions:
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(i) Subject to the other provisions of this Plan and the
terms of the particular Award Agreements, during such period as
may be determined by the Committee commencing on the Date of
Grant or the date of exercise of an Award (the
“Restriction Period”
), the Participant shall
not be permitted to sell, transfer, pledge or assign shares of
Restricted Stock. Except for these limitations, the Committee
may in its sole discretion, remove any or all of the
restrictions on such Restricted Stock whenever it may determine
that, by reason of changes in applicable laws or other changes
in circumstances arising after the date of the Award, such
action is appropriate.
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(ii) Except as provided in
sub-paragraph (i) above or in the applicable Award
Agreement, the Participant shall have, with respect to his or
her Restricted Stock, all of the rights of a stockholder of the
Company, including the right to vote the shares, and the right
to receive any dividends thereon. Certificates for shares of
Common Stock free of restriction under this Plan shall be
delivered to the Participant promptly after, and only after, the
Restriction Period shall expire without forfeiture in respect of
such shares of Common Stock or after any other restrictions
imposed in such shares of
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Common Stock by the applicable Award Agreement or other
agreement have expired. Certificates for the shares of Common
Stock forfeited under the provisions of the Plan and the
applicable Award Agreement shall be promptly returned to the
Company by the forfeiting Participant. Each Award Agreement
shall require that each Participant, in connection with the
issuance of a certificate for Restricted Stock, shall endorse
such certificate in blank or execute a stock power in form
satisfactory to the Company in blank and deliver such
certificate and executed stock power to the Company.
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(iii) The Restriction Period of Restricted Stock shall
commence on the Date of Grant or the date of exercise of an
Award, as specified in the Award Agreement, and, subject to
Article 12
of the Plan, unless otherwise established
by the Committee in the Award Agreement setting forth the terms
of the Restricted Stock, shall expire upon satisfaction of the
conditions set forth in the Award Agreement; such conditions may
provide for vesting based on such Performance Goals, as may be
determined by the Committee in its sole discretion.
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(iv) Except as otherwise provided in the particular Award
Agreement, upon Termination of Service for any reason during the
Restriction Period, the nonvested shares of Restricted Stock
shall be forfeited by the Participant. In the event a
Participant has paid any consideration to the Company for such
forfeited Restricted Stock, the Committee shall specify in the
Award Agreement that either (i) the Company shall be
obligated to, or (ii) the Company may, in its sole
discretion, elect to, pay to the Participant, as soon as
practicable after the event causing forfeiture, in cash, an
amount equal to the lesser of the total consideration paid by
the Participant for such forfeited shares or the Fair Market
Value of such forfeited shares as of the date of Termination of
Service, as the Committee, in its sole discretion shall select.
Upon any forfeiture, all rights of a Participant with respect to
the forfeited shares of the Restricted Stock shall cease and
terminate, without any further obligation on the part of the
Company.
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6.5
SARs.
The Committee may
grant SARs to any Participant, either as a separate Award or in
connection with a Stock Option. SARs shall be subject to such
terms and conditions as the Committee shall impose, provided
that such terms and conditions are (i) not inconsistent
with the Plan and (ii) to the extent a SAR issued under the
Plan is subject to Section 409A of the Code, in compliance
with the applicable requirements of Section 409A of the
Code and the regulations or other guidance issued thereunder.
The grant of the SAR may provide that the holder may be paid for
the value of the SAR either in cash or in shares of Common
Stock, or a combination thereof. In the event of the exercise of
a SAR payable in shares of Common Stock, the holder of the SAR
shall receive that number of whole shares of Common Stock having
an aggregate Fair Market Value on the date of exercise equal to
the value obtained by multiplying (i) the difference
between the Fair Market Value of a share of Common Stock on the
date of exercise over the SAR Price as set forth in such SAR (or
other value specified in the agreement granting the SAR), by
(ii) the number of shares of Common Stock as to which the
SAR is exercised, with a cash settlement to be made for any
fractional shares of Common Stock. The SAR Price for any share
of Common Stock subject to a SAR may be equal to or greater than
the Fair Market Value of the share on the Date of Grant. The
Committee, in its sole discretion, may place a ceiling on the
amount payable upon exercise of a SAR, but any such limitation
shall be specified at the time that the SAR is granted.
6.6
Restricted Stock Units.
Restricted Stock Units may be awarded or sold to any Participant
under such terms and conditions as shall be established by the
Committee, provided, however, that such terms and conditions are
(i) not inconsistent with the Plan and (ii) to the
extent a Restricted Stock Unit issued under the Plan is subject
to Section 409A of the Code, in compliance with the
applicable requirements of Section 409A of the Code and the
regulations or other guidance issued thereunder. Restricted
Stock Units shall be subject to such restrictions as the
Committee determines, including, without limitation, (a) a
prohibition against sale, assignment, transfer, pledge,
hypothecation or other encumbrance for a specified
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period; or (b) a requirement that the holder forfeit (or in
the case of shares of Common Stock or units sold to the
Participant, resell to the Company at cost) such shares or units
in the event of Termination of Service during the period of
restriction.
6.7
Performance Awards.
(a) The Committee may grant Performance Awards to any
Participant upon such terms and conditions as shall be specified
at the time of the grant and may include provisions establishing
the performance period, the Performance Goals to be achieved
during a performance period, and the maximum or minimum
settlement values, provided that such terms and conditions are
(i) not inconsistent with the Plan and (ii) to the
extent a Performance Award issued under the Plan is subject to
Section 409A of the Code, in compliance with the applicable
requirements of Section 409A of the Code and the
regulations or other guidance issued thereunder. Each
Performance Award shall have its own terms and conditions. At
the time of the grant of a Performance Award intended to satisfy
the requirements of Section 162(m) of the Code (other than
a Stock Option) and to the extent permitted under
Section 162(m) of the Code and the regulations issued
thereunder, the Committee:
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(i) shall provide for the manner in which the Performance
Goals shall be reduced to take into account the negative effect
on the attained levels of the Performance Goals which result
from specified corporate transactions, extraordinary events,
accounting changes and other similar occurrences, so long as
those transactions, events, changes and occurrences were not
certain at the time the Performance Goal was initially
established and the amount of the Performance Award for any
Participant is not increased, unless the reduction in the
Performance Goals would reduce or eliminate the amount of the
Performance Award, and the Committee determines not to make such
reduction; and
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(ii) may provide for the manner in which the Performance
Goals will be measured in light of specified corporate
transactions, extraordinary events, accounting changes and other
similar occurrences, to the extent those transactions, events,
changes and occurrences have a positive effect on the attained
levels of the Performance Goals, so long as the Committee’s
actions do not increase the amount of the Performance Award for
any Participant.
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The determination of the amount of any reduction in the
Performance Goals shall be made by the Committee in consultation
with the Company’s independent auditor or compensation
consultant. With respect to a Performance Award that is not
intended to satisfy the requirements of Section 162(m) of
the Code, if the Committee determines, in its sole discretion,
that the established performance measures or objectives are no
longer suitable because of a change in the Company’s
business, operations, corporate structure, or for other reasons
that the Committee deemed satisfactory, the Committee may modify
the performance measures or objectives and/or the performance
period.
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(b) Performance Awards may be valued by reference to the
Fair Market Value of a share of Common Stock or according to any
formula or method deemed appropriate by the Committee, in its
sole discretion, including, but not limited to, achievement of
Performance Goals or other specific financial, production, sales
or cost performance objectives that the Committee believes to be
relevant to the Company’s business and/or remaining in the
employ of the Company for a specified period of time.
Performance Awards may be paid in cash, shares of Common Stock,
or other consideration, or any combination thereof. If payable
in shares of Common Stock, the consideration for the issuance of
such shares may be the achievement of the performance objective
established at the time of the grant of the Performance Award.
Performance Awards may be payable in a single payment or in
installments and may be payable at a specified date or dates or
upon attaining the performance objective. The extent to which
any applicable performance objective has been achieved shall be
conclusively determined by the Committee.
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6.8
Dividend Equivalent
Rights.
The Committee may grant a Dividend Equivalent Right
to any Participant, either as a component of another Award or as
a separate Award. The terms and conditions of the Dividend
Equivalent Right shall be specified by the grant. Dividend
equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in
additional shares of Common Stock (which may thereafter accrue
additional dividend equivalents). Any such reinvestment shall be
at the Fair Market Value at the time thereof. Dividend
Equivalent Rights may be settled in cash or shares of Common
Stock, or a combination thereof, in a single payment or in
installments. A Dividend Equivalent Right granted as a component
of another Award may provide that such Dividend Equivalent Right
shall be settled upon exercise, settlement, or payment of, or
lapse of restrictions on, such other Award, and that such
Dividend Equivalent Right granted as a component of another
Award may also contain terms and conditions different from such
other Award.
6.9
Other Awards.
The
Committee may grant to any Participant other forms of Awards,
based upon, payable in, or otherwise related to, in whole or in
part, shares of Common Stock, if the Committee determines that
such other form of Award is consistent with the purpose and
restrictions of this Plan. The terms and conditions of such
other form of Award shall be specified by the grant. Such Other
Awards may be granted for no cash consideration, for such
minimum consideration as may be required by applicable law, or
for such other consideration as may be specified by the grant.
6.10
Performance Goals.
Awards of Restricted Stock, Restricted Stock Units, Performance
Award and Other Awards (whether relating to cash or shares of
Common Stock) under the Plan may be made subject to the
attainment of Performance Goals relating to one or more business
criteria within the meaning of Section 162(m) of the Code
that consist of one or more or any combination of the following
criteria: growth in interest income and expense; net interest
margin; efficiency ratio; growth in non-interest income and
non-interest expense and ratios to earnings assets; net revenue
growth and ratio to earning assets; capital ratios; asset or
liability interest rate sensitivity and gap; effective tax rate;
deposit growth and composition; liquidity management; securities
portfolio (value, yield, spread, maturity, or duration); earning
asset growth and composition (loans, securities); non-interest
income (including, fees, premiums and commissions, loans, wealth
management, treasury management, insurance, funds management);
overhead ratios, productivity EA/FTE, pre-tax income/FTE);
credit quality measures; return on assets; return on equity;
economic value of equity EVE; compliance ratings; internal
controls; enterprise risk measures (including interest rate,
loan concentrations, portfolio composition, credit quality,
operational measures, compliance ratings, balance sheet,
liquidity, insurance); cash flow; cost; revenues; sales; ratio
of debt to debt plus equity; net borrowing, credit quality or
debt ratings; profit before tax; economic profit; earnings
before interest and taxes; earnings before interest, taxes,
depreciation and amortization; gross margin; earnings per share
(whether on a pre-tax, after-tax, operational or other basis);
operating earnings; capital expenditures; expenses or expense
levels; economic value added; ratio of operating earnings to
capital spending or any other operating ratios; free cash flow;
net profit; net sales; net asset value per share; the
accomplishment of mergers, acquisitions, dispositions, public
offerings or similar extraordinary business transactions; sales
growth; price of the Company’s Common Stock; return on
assets, equity or stockholders’ equity; market share;
inventory levels, inventory turn or shrinkage; or total return
to stockholders
(“Performance Criteria”)
. Any
Performance Criteria may be used to measure the performance of
the Company as a whole or any business unit of the Company and
may be measured relative to a peer group or index. Any
Performance Criteria may include or exclude
(i) extraordinary, unusual and/or non-recurring items of
gain or loss, (ii) gains or losses on the disposition of a
business, (iii) changes in tax or accounting regulations or
laws, or (iv) the effect of a merger or acquisition, as
identified in the Company’s quarterly and annual earnings
releases. In all other respects, Performance Criteria shall be
calculated in accordance with the Company’s financial
statements, under generally accepted accounting principles, or
under a methodology established by the Committee prior to the
issuance of an Award which is consistently applied and
identified in the audited financial statements,
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including footnotes, or the Management Discussion and Analysis
section of the Company’s annual report. However, the
Committee may not in any event increase the amount of
compensation payable to an individual upon the attainment of a
Performance Goal.
6.11
Tandem Awards.
The
Committee may grant two or more Incentives in one Award in the
form of a “tandem Award,” so that the right of the
Participant to exercise one Incentive shall be canceled if, and
to the extent, the other Incentive is exercised. For example, if
a Stock Option and a SAR are issued in a tandem Award, and the
Participant exercises the SAR with respect to 100 shares of
Common Stock, the right of the Participant to exercise the
related Stock Option shall be canceled to the extent of
100 shares of Common Stock.
ARTICLE 7
AWARD PERIOD; VESTING
7.1
Award Period.
Subject to
the other provisions of this Plan, the Committee may, in its
discretion, provide that an Incentive may not be exercised in
whole or in part for any period or periods of time or beyond any
date specified in the Award Agreement. Except as provided in the
Award Agreement, an Incentive may be exercised in whole or in
part at any time during its term. The Award Period for an
Incentive shall be reduced or terminated upon Termination of
Service. No Incentive granted under the Plan may be exercised at
any time after the end of its Award Period. No portion of any
Incentive may be exercised after the expiration of ten
(10) years from its Date of Grant. However, if an Employee
owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than ten
percent (10%) of the combined voting power of all classes
of stock of the Company (or any parent or Subsidiary) and an
Incentive Stock Option is granted to such Employee, the term of
such Incentive Stock Option (to the extent required by the Code
at the time of grant) shall be no more than five (5) years
from the Date of Grant.
7.2
Vesting.
The Committee,
in its sole discretion, may determine that an Incentive will be
immediately vested in whole or in part, or that all or any
portion may not be vested until a date, or dates, subsequent to
its Date of Grant, or until the occurrence of one or more
specified events, subject in any case to the terms of the Plan.
If the Committee imposes conditions upon vesting, then,
subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of
the Incentive may be vested.
ARTICLE 8
EXERCISE OR CONVERSION OF INCENTIVE
8.1
In General.
A vested
Incentive may be exercised or converted, during its Award
Period, subject to limitations and restrictions set forth in the
Award Agreement.
8.2
Securities Law and Exchange
Restrictions.
In no event may an Incentive be exercised or
shares of Common Stock be issued pursuant to an Award if a
necessary listing or quotation of the shares of Common Stock on
a stock exchange or inter-dealer quotation system or any
registration under state or federal securities laws required
under the circumstances has not been accomplished.
8.3
Exercise of Stock Option.
(a)
In General.
If a Stock Option is exercisable
prior to the time it is vested, the Common Stock obtained on the
exercise of the Stock Option shall be Restricted Stock which is
subject to the applicable provisions of the Plan and the Award
Agreement. If the Committee imposes conditions upon exercise,
then
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subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of
the Stock Option may be exercised. No Stock Option may be
exercised for a fractional share of Common Stock. The granting
of a Stock Option shall impose no obligation upon the
Participant to exercise that Stock Option.
(b)
Notice and Payment.
Subject to such
administrative regulations as the Committee may from time to
time adopt, a Stock Option may be exercised by the delivery of
written notice to the Company setting forth the number of shares
of Common Stock with respect to which the Stock Option is to be
exercised and the date of exercise thereof (the
“Exercise Date”
) which shall be at least three
(3) days after giving such notice unless an earlier time
shall have been mutually agreed upon. On the Exercise Date, the
Participant shall deliver to the Company consideration with a
value equal to the total Option Price of the shares to be
purchased, payable as provided in the Award Agreement, which may
provide for payment in any one or more of the following ways:
(a) cash or check, bank draft, or money order payable to
the order of the Company, (b) Common Stock (including
Restricted Stock) owned by the Participant on the Exercise Date,
valued at its Fair Market Value on the Exercise Date, and which
the Participant has not acquired from the Company within six
(6) months prior to the Exercise Date, (c) by delivery
(including by FAX) to the Company or its designated agent of an
executed irrevocable option exercise form together with
irrevocable instructions from the Participant to a broker or
dealer, reasonably acceptable to the Company, to sell certain of
the shares of Common Stock purchased upon exercise of the Stock
Option or to pledge such shares as collateral for a loan and
promptly deliver to the Company the amount of sale or loan
proceeds necessary to pay such purchase price, and/or
(d) in any other form of valid consideration that is
acceptable to the Committee in its sole discretion. In the event
that shares of Restricted Stock are tendered as consideration
for the exercise of a Stock Option, a number of shares of Common
Stock issued upon the exercise of the Stock Option with an
Option Price equal to the value of Restricted Stock used as
consideration therefor shall be subject to the same restrictions
and provisions as the Restricted Stock so tendered.
(c)
Reload Stock Options.
In the event that shares
of Common Stock are delivered by a Participant in payment of all
or a portion of the exercise price of a Stock Option as set
forth in Section 8.3(b) above and/or shares of Common Stock
are delivered to or withheld by the Company in satisfaction of
the Company’s tax withholding obligations upon exercise in
accordance with Section 15.6 hereof, then, subject to
Article 10 hereof, the Committee may authorize the
automatic grant to a Participant so exercising a Nonqualified
Stock Option, a replacement Nonqualified Stock Option, and to a
Participant so exercising an Incentive Stock Option, a
replacement Incentive Stock Option (in either case, a
“Reload Stock Option”), to purchase that number of
shares so delivered to or withheld by the Company, as the case
may be, at an option exercise price equal to the Fair Market
Value per share of the Common Stock on the date of exercise of
the original Stock Option (subject to the provisions of the Plan
regarding Incentive Stock Options and, in any event not less
than the par value per share of the Common Stock). The option
period for a Reload Stock Option will commence on its Date of
Grant and expire on the expiration date of the original Stock
Option it replaces (subject to the provisions of the Plan
regarding Incentive Stock Options), after which period the
Reload Stock Option cannot be exercised. The Date of Grant of a
Reload Stock Option shall be the date that the Stock Option it
replaces is exercised. A Reload Stock Option shall automatically
vest and be exercisable in full after the expiration of six
(6) months from its Date of Grant. It shall be a condition
to the grant of a Reload Stock Option that promptly after its
Date of Grant, a stock option agreement shall be delivered to
the Participant and executed by the Participant and the Company
which sets forth the total number of shares subject to the
Reload Stock Option, the option exercise price, the option
period of the Reload Stock Option and such other terms and
provisions as are consistent with the Plan.
(d)
Issuance of Certificate.
Except as otherwise
provided in
Section 6.4
hereof (with respect to
shares of Restricted Stock) or in the applicable Award
Agreement, upon payment of all amounts due from the Participant,
the Company shall cause certificates for the Common Stock then
being purchased to be
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delivered as directed by the Participant (or the person
exercising the Participant’s Stock Option in the event of
his death) at its principal business office promptly after the
Exercise Date; provided that if the Participant has exercised an
Incentive Stock Option, the Company may at its option retain
physical possession of the certificate evidencing the shares
acquired upon exercise until the expiration of the holding
periods described in Section 422(a)(1) of the Code. The
obligation of the Company to deliver shares of Common Stock
shall, however, be subject to the condition that, if at any time
the Committee shall determine in its discretion that the
listing, registration, or qualification of the Stock Option or
the Common Stock upon any securities exchange or inter-dealer
quotation system or under any state or federal law, or the
consent or approval of any governmental regulatory body, is
necessary as a condition of, or in connection with, the Stock
Option or the issuance or purchase of shares of Common Stock
thereunder, the Stock Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent,
or approval shall have been effected or obtained free of any
conditions not reasonably acceptable to the Committee.
(e)
Failure to Pay.
Except as may otherwise be
provided in an Award Agreement, if the Participant fails to pay
for any of the Common Stock specified in such notice or fails to
accept delivery thereof, that portion of the Participant’s
Stock Option and right to purchase such Common Stock may be
forfeited by the Company.
8.4
SARs.
Subject to the
conditions of this Section 8.4 and such administrative
regulations as the Committee may from time to time adopt, a SAR
may be exercised by the delivery (including by FAX) of written
notice to the Company setting forth the number of shares of
Common Stock with respect to which the SAR is to be exercised
and the date of exercise thereof (the
“Exercise
Date”
) which shall be at least three (3) days
after giving such notice unless an earlier time shall have been
mutually agreed upon. Subject to the terms of the Award
Agreement and only if permissible under Section 409A of the
Code and the regulations or other guidance issued thereunder
(or, if not so permissible, at such time as permitted by
Section 409A of the Code and the regulations or other
guidance issued thereunder), the Participant shall receive from
the Company in exchange therefor in the discretion of the
Committee, and subject to the terms of the Award Agreement:
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(i) cash in an amount equal to the excess (if any) of the
Fair Market Value (as of the date of the exercise, or if
provided in the Award Agreement, conversion, of the SAR) per
share of Common Stock over the SAR Price per share specified in
such SAR, multiplied by the total number of shares of Common
Stock of the SAR being surrendered;
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(ii) that number of shares of Common Stock having an
aggregate Fair Market Value (as of the date of the exercise, or
if provided in the Award Agreement, conversion, of the SAR)
equal to the amount of cash otherwise payable to the
Participant, with a cash settlement to be made for any
fractional share interests; or
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(iii) the Company may settle such obligation in part with
shares of Common Stock and in part with cash.
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The distribution of any cash or Common Stock pursuant to the
foregoing sentence shall be made at such time as set forth in
the Award Agreement.
8.5
Disqualifying Disposition of
Incentive Stock Option.
If shares of Common Stock acquired
upon exercise of an Incentive Stock Option are disposed of by a
Participant prior to the expiration of either two (2) years
from the Date of Grant of such Stock Option or one (1) year
from the transfer of shares of Common Stock to the Participant
pursuant to the exercise of such Stock Option, or in any other
disqualifying disposition within the meaning of Section 422
of the Code, such Participant shall notify the Company in
writing of the date and terms of such disposition. A
disqualifying disposition by a Participant shall not affect the
status of
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any other Stock Option granted under the Plan as an Incentive
Stock Option within the meaning of Section 422 of the Code.
ARTICLE 9
AMENDMENT OR DISCONTINUANCE
Subject to the limitations set forth in this
Article 9
, the Board may at any time and from time
to time, without the consent of the Participants, alter, amend,
revise, suspend, or discontinue the Plan in whole or in part;
provided, however, that no amendment for which stockholder
approval is required either (i) by any securities exchange
or inter-dealer quotation system on which the Common Stock is
listed or traded or (ii) in order for the Plan and
Incentives awarded under the Plan to continue to comply with
Sections 162(m), 421, and 422 of the Code, including any
successors to such Sections; shall be effective unless such
amendment shall be approved by the requisite vote of the
stockholders of the Company entitled to vote thereon. Any such
amendment shall, to the extent deemed necessary or advisable by
the Committee, be applicable to any outstanding Incentives
theretofore granted under the Plan, notwithstanding any contrary
provisions contained in any Award Agreement. In the event of any
such amendment to the Plan, the holder of any Incentive
outstanding under the Plan shall, upon request of the Committee
and as a condition to the exercisability thereof, execute a
conforming amendment in the form prescribed by the Committee to
any Award Agreement relating thereto. Notwithstanding anything
contained in this Plan to the contrary, unless required by law,
no action contemplated or permitted by this
Article 9
shall adversely affect any rights of
Participants or obligations of the Company to Participants with
respect to any Incentive theretofore granted under the Plan
without the consent of the affected Participant.
ARTICLE 10
TERM
The Plan shall be effective from the date that this Plan is
approved by the Board. Unless sooner terminated by action of the
Board, the Plan will terminate on May 17, 2015, but
Incentives granted before that date will continue to be
effective in accordance with their terms and conditions.
ARTICLE 11
CAPITAL ADJUSTMENTS
In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property),
recapitalization, stock split, reverse stock split, rights
offering, reorganization, merger, consolidation, split-up,
spin-off, split-off, combination, subdivision, repurchase, or
exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or
other securities of the Company, or other similar corporate
transaction or event affects the Common Stock such that an
adjustment is determined by the Committee to be appropriate to
prevent the dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust
any or all of the (i) the number of shares and type of
Common Stock (or the securities or property) which thereafter
may be made the subject of Awards, (ii) the number of
shares and type of Common Stock (or other securities or
property) subject to outstanding Awards, (iii) the number
of shares and type of Common Stock (or other securities or
property) specified as the annual per-participant limitation
under
Section 5.1
of the Plan, (iv) the Option
Price of each outstanding Award, (v) the amount, if any,
the Company pays for forfeited shares of Common Stock in
accordance with
Section 6.4
of the Plan, and
(vi) the number of or
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SAR Price of shares of Common Stock then subject to outstanding
SARs previously granted and unexercised under the Plan to the
end that the same proportion of the Company’s issued and
outstanding shares of Common Stock in each instance shall remain
subject to exercise at the same aggregate SAR Price; provided
however, that the number of shares of Common Stock (or other
securities or property) subject to any Award shall always be a
whole number. In lieu of the foregoing, if deemed appropriate,
the Committee may make provision for a cash payment to the
holder of an outstanding Award. Notwithstanding the foregoing,
no such adjustment or cash payment shall be made or authorized
to the extent that such adjustment or cash payment would cause
the Plan or any Stock Option to violate Section 422 of the
Code. Such adjustments shall be made in accordance with the
rules of any securities exchange, stock market, or stock
quotation system to which the Company is subject.
Upon the occurrence of any such adjustment or cash payment, the
Company shall provide notice to each affected Participant of its
computation of such adjustment or cash payment which shall be
conclusive and shall be binding upon each such Participant.
ARTICLE 12
RECAPITALIZATION, MERGER AND CONSOLIDATION
12.1
No Effect on Company’s
Authority.
The existence of this Plan and Incentives granted
hereunder shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations, or other
changes in the Company’s capital structure and its
business, or any Change in Control, or any merger or
consolidation of the Company, or any issuance of bonds,
debentures, preferred or preference stocks ranking prior to or
otherwise affecting the Common Stock or the rights thereof (or
any rights, options, or warrants to purchase same), or the
dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar
character or otherwise.
12.2
Conversion of Incentives
Where Company Survives.
Subject to any required action by
the stockholders and except as otherwise provided by
Section 12.4
hereof or as may be required to comply
with Section 409A of the Code and the regulations or other
guidance issued thereunder, if the Company shall be the
surviving or resulting corporation in any merger, consolidation
or share exchange, any Incentive granted hereunder shall pertain
to and apply to the securities or rights (including cash,
property, or assets) to which a holder of the number of shares
of Common Stock subject to the Incentive would have been
entitled.
12.3
Exchange or Cancellation of
Incentives Where Company Does Not Survive.
Except as
otherwise provided by
Section 12.4
hereof or as may
be required to comply with Section 409A of the Code and the
regulations or other guidance issued thereunder, in the event of
any merger, consolidation or share exchange pursuant to which
the Company is not the surviving or resulting corporation, there
shall be substituted for each share of Common Stock subject to
the unexercised portions of outstanding Incentives, that number
of shares of each class of stock or other securities or that
amount of cash, property, or assets of the surviving, resulting
or consolidated company which were distributed or distributable
to the stockholders of the Company in respect to each share of
Common Stock held by them, such outstanding Incentives to be
thereafter exercisable for such stock, securities, cash, or
property in accordance with their terms.
12.4
Cancellation of
Incentives.
Notwithstanding the provisions of
Sections 12.2 and 12.3
hereof, and except as may be
required to comply with Section 409A of the Code and the
regulations or other guidance issued thereunder, all Incentives
granted hereunder may be canceled by the Company, in its sole
discretion, as of the effective date of any Change in Control,
merger, consolidation or share exchange, or any issuance of
bonds, debentures, preferred or preference stocks ranking prior
to or otherwise affecting the Common Stock or the rights thereof
(or any rights, options, or warrants to purchase same), or of any
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proposed sale of all or substantially all of the assets of the
Company, or of any dissolution or liquidation of the Company, by
either:
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(a) giving notice to each holder thereof or his personal
representative of its intention to cancel those Incentives for
which the issuance of shares of Common Stock involved payment by
the Participant for such shares and, permitting the purchase
during the thirty (30) day period next preceding such
effective date of any or all of the shares of Common Stock
subject to such outstanding Incentives, including in the
Board’s discretion some or all of the shares as to which
such Incentives would not otherwise be vested and
exercisable; or
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(b) in the case of Incentives that are either
(i) settled only in shares of Common Stock, or (ii) at
the election of the Participant, settled in shares of Common
Stock, paying the holder thereof an amount equal to a reasonable
estimate of the difference between the net amount per share
payable in such transaction or as a result of such transaction,
and the price per share of such Incentive to be paid by the
Participant (hereinafter the
“Spread”
),
multiplied by the number of shares subject to the Incentive. In
cases where the shares constitute, or would after exercise,
constitute Restricted Stock, the Company, in its discretion may
include some or all of those shares in the calculation of the
amount payable hereunder. In estimating the Spread, appropriate
adjustments to give effect to the existence of the Incentives
shall be made, such as deeming the Incentives to have been
exercised, with the Company receiving the exercise price payable
thereunder, and treating the shares receivable upon exercise of
the Incentives as being outstanding in determining the net
amount per share. In cases where the proposed transaction
consists of the acquisition of assets of the Company, the net
amount per share shall be calculated on the basis of the net
amount receivable with respect to shares of Common Stock upon a
distribution and liquidation by the Company after giving effect
to expenses and charges, including but not limited to taxes,
payable by the Company before such liquidation could be
completed.
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(c) An Award that by its terms would be fully vested or
exercisable upon a Change in Control will be considered vested
or exercisable for purposes of
Section 12.4(a)
hereof.
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ARTICLE 13
LIQUIDATION OR DISSOLUTION
Subject to
Section 12.4
hereof, in case the Company
shall, at any time while any Incentive under this Plan shall be
in force and remain unexpired, (i) sell all or
substantially all of its property, or (ii) dissolve,
liquidate, or wind up its affairs, then each Participant shall
be entitled to receive, in lieu of each share of Common Stock of
the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any
securities or assets as may be issuable, distributable, or
payable upon any such sale, dissolution, liquidation, or winding
up with respect to each share of Common Stock of the Company. If
the Company shall, at any time prior to the expiration of any
Incentive, make any partial distribution of its assets, in the
nature of a partial liquidation, whether payable in cash or in
kind (but excluding the distribution of a cash dividend payable
out of earned surplus and designated as such) and an adjustment
is determined by the Committee to be appropriate to prevent the
dilution of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such
manner as it may deem equitable, make such adjustment in
accordance with the provisions of
Article 11
hereof.
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ARTICLE 14
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER ENTITIES
Incentives may be granted under the Plan from time to time in
substitution for similar instruments held by employees,
consultants, contractors or directors of a corporation,
partnership, or limited liability company who become or are
about to become Employees, Contractors, Consultants or Outside
Directors of the Company or any Subsidiary as a result of a
merger or consolidation of the employing corporation with the
Company, the acquisition by the Company of equity of the
employing entity, or any other similar transaction pursuant to
which the Company becomes the successor employer. The terms and
conditions of the substitute Incentives so granted may vary from
the terms and conditions set forth in this Plan to such extent
as the Committee at the time of grant may deem appropriate to
conform, in whole or in part, to the provisions of the
Incentives in substitution for which they are granted.
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.1
Investment Intent.
The
Company may require that there be presented to and filed with it
by any Participant under the Plan, such evidence as it may deem
necessary to establish that the Incentives granted or the shares
of Common Stock to be purchased or transferred are being
acquired for investment and not with a view to their
distribution.
15.2
No Right to Continued
Employment.
Neither the Plan nor any Incentive granted under
the Plan shall confer upon any Participant any right with
respect to continuance of employment by the Company or any
Subsidiary.
15.3
Indemnification of Board
and Committee.
No member of the Board or the Committee, nor
any officer or Employee of the Company acting on behalf of the
Board or the Committee, shall be personally liable for any
action, determination, or interpretation taken or made in good
faith with respect to the Plan, and all members of the Board and
the Committee, each officer of the Company, and each Employee of
the Company acting on behalf of the Board or the Committee
shall, to the extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action,
determination, or interpretation.
15.4
Effect of the Plan.
Neither the adoption of this Plan nor any action of the Board or
the Committee shall be deemed to give any person any right to be
granted an Award or any other rights except as may be evidenced
by an Award Agreement, or any amendment thereto, duly authorized
by the Committee and executed on behalf of the Company, and then
only to the extent and upon the terms and conditions expressly
set forth therein.
15.5
Compliance With Other Laws
and Regulations.
Notwithstanding anything contained herein
to the contrary, the Company shall not be required to sell or
issue shares of Common Stock under any Incentive if the issuance
thereof would constitute a violation by the Participant or the
Company of any provisions of any law or regulation of any
governmental authority or any national securities exchange or
inter-dealer quotation system or other forum in which shares of
Common Stock are quoted or traded (including without limitation
Section 16 of the 1934 Act and Section 162(m) of
the Code); and, as a condition of any sale or issuance of shares
of Common Stock under an Incentive, the Committee may require
such agreements or undertakings, if any, as the Committee may
deem necessary or advisable to assure compliance with any such
law or regulation. The Plan, the grant and exercise of
Incentives hereunder, and the obligation of the Company to sell
and deliver shares of Common Stock, shall be subject to all
applicable federal and state
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laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required.
15.6
Tax Requirements.
The
Company or, if applicable, any Subsidiary (for purposes of this
Section 15.6
, the term
“Company”
shall be deemed to include any applicable Subsidiary), shall
have the right to deduct from all amounts paid in cash or other
form in connection with the Plan, any Federal, state, local, or
other taxes required by law to be withheld in connection with an
Award granted under this Plan. The Company may, in its sole
discretion, also require the Participant receiving shares of
Common Stock issued under the Plan to pay the Company the amount
of any taxes that the Company is required to withhold in
connection with the Participant’s income arising with
respect to the Award. Such payments shall be required to be made
when requested by Company and may be required to be made prior
to the delivery of any certificate representing shares of Common
Stock. Such payment may be made (i) by the delivery of cash
to the Company in an amount that equals or exceeds (to avoid the
issuance of fractional shares under (iii) below) the
required tax withholding obligations of the Company;
(ii) if the Company, in its sole discretion, so consents in
writing, the actual delivery by the exercising Participant to
the Company of shares of Common Stock that the Participant has
not acquired from the Company within six (6) months prior
to the date of exercise, which shares so delivered have an
aggregate Fair Market Value that equals or exceeds (to avoid the
issuance of fractional shares under (iii) below) the
required tax withholding payment; (iii) if the Company, in
its sole discretion, so consents in writing, the Company’s
withholding of a number of shares to be delivered upon the
exercise of the Award, which shares so withheld have an
aggregate fair market value that equals (but does not exceed)
the required tax withholding payment; or (iv) any
combination of (i), (ii), or (iii). The Company may, in its
sole discretion, withhold any such taxes from any other cash
remuneration otherwise paid by the Company to the Participant.
The Committee may in the Award Agreement impose any additional
tax requirements or provisions that the Committee deems
necessary or desirable.
15.7
Assignability.
Incentive Stock Options may not be transferred, assigned,
pledged, hypothecated or otherwise conveyed or encumbered other
than by will or the laws of descent and distribution and may be
exercised during the lifetime of the Participant only by the
Participant or the Participant’s legally authorized
representative, and each Award Agreement in respect of an
Incentive Stock Option shall so provide. The designation by a
Participant of a beneficiary will not constitute a transfer of
the Stock Option. The Committee may waive or modify any
limitation contained in the preceding sentences of this
Section 15.7
that is not required for compliance
with Section 422 of the Code.
Except as otherwise provided herein, Nonqualified Stock Options
and SARs may not be transferred, assigned, pledged, hypothecated
or otherwise conveyed or encumbered other than by will or the
laws of descent and distribution. The Committee may, in its
discretion, authorize all or a portion of a Nonqualified Stock
Option or SAR to be granted to a Participant on terms which
permit transfer by such Participant to (i) the spouse (or
former spouse), children or grandchildren of the Participant
(“Immediate Family Members”)
, (ii) a trust
or trusts for the exclusive benefit of such Immediate Family
Members, (iii) a partnership in which the only partners are
(1) such Immediate Family Members and/or (2) entities
which are controlled by Immediate Family Members, (iv) an
entity exempt from federal income tax pursuant to
Section 501(c)(3) of the Code or any successor provision,
or (v) a split interest trust or pooled income fund
described in Section 2522(c)(2) of the Code or any
successor provision,
provided that
(x) there shall
be no consideration for any such transfer, (y) the Award
Agreement pursuant to which such Nonqualified Stock Option or
SAR is granted must be approved by the Committee and must
expressly provide for transferability in a manner consistent
with this Section, and (z) subsequent transfers of
transferred Nonqualified Stock Options or SARs shall be
prohibited except those by will or the laws of descent and
distribution.
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Following any transfer, any such Nonqualified Stock Option and
SAR shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer,
provided that for purposes of
Articles 8, 9, 11, 13
and 15
hereof the term “Participant” shall be
deemed to include the transferee. The events of Termination of
Service shall continue to be applied with respect to the
original Participant, following which the Nonqualified Stock
Options and SARs shall be exercisable or convertible by the
transferee only to the extent and for the periods specified in
the Award Agreement. The Committee and the Company shall have no
obligation to inform any transferee of a Nonqualified Stock
Option or SAR of any expiration, termination, lapse or
acceleration of such Stock Option or SAR. The Company shall have
no obligation to register with any federal or state securities
commission or agency any Common Stock issuable or issued under a
Nonqualified Stock Option or SAR that has been transferred by a
Participant under this
Section 15.7.
15.8
Use of Proceeds.
Proceeds from the sale of shares of Common Stock pursuant to
Incentives granted under this Plan shall constitute general
funds of the Company.
15.9
Legend.
In the event
the Company physically transfers certificates representing
shares of Restricted Stock to a Participant, each certificate
representing such shares of Restricted Stock shall bear the
following legend, or a similar legend deemed by the Company to
constitute an appropriate notice of the provisions hereof (any
such certificate not having such legend shall be surrendered
upon demand by the Company and so endorsed):
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On the face of the certificate:
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“Transfer of this stock is restricted in accordance with
conditions printed on the reverse of this certificate.”
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“The shares of stock evidenced by this certificate are
subject to and transferable only in accordance with that certain
Texas Capital Bancshares, Inc. 2005 Long-Term Incentive Plan, a
copy of which is on file at the principal office of the Company
in Dallas, Texas. No transfer or pledge of the shares evidenced
hereby may be made except in accordance with and subject to the
provisions of said Plan. By acceptance of this certificate, any
holder, transferee or pledgee hereof agrees to be bound by all
of the provisions of said Plan.”
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The following legend shall be inserted on a certificate
evidencing Common Stock issued under the Plan if the shares were
not issued in a transaction registered under the applicable
federal and state securities laws:
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“Shares of stock represented by this certificate have been
acquired by the holder for investment and not for resale,
transfer or distribution, have been issued pursuant to
exemptions from the registration requirements of applicable
state and federal securities laws, and may not be offered for
sale, sold or transferred other than pursuant to effective
registration under such laws, or in transactions otherwise in
compliance with such laws, and upon evidence satisfactory to the
Company of compliance with such laws, as to which the Company
may rely upon an opinion of counsel satisfactory to the
Company.”
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A copy of this Plan shall be kept on file in the principal
office of the Company in Dallas, Texas.
A-21
**************
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed as
of ,
2005, by its Chief Executive Officer and Secretary pursuant to
prior action taken by the Board.
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TEXAS CAPITAL BANCSHARES, INC.
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Joseph M. Grant,
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Chairman and Chief Executive Officer
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Attest:
A-22
REVOCABLE PROXY
TEXAS CAPITAL BANCSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2005, 10:00 AM
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby appoints Joseph M. Grant and Peter B.
Bartholow, each with full power of substitution, to act as
proxies for the undersigned, and to vote all shares of preferred
stock and common stock of Texas Capital Bancshares, Inc. that
the undersigned is entitled to vote at the Annual Meeting of
Stockholders, on Tuesday May 17, 2005 at 10:00 AM at
the offices of Texas Capital Bank, National Association at
2100 McKinney Avenue, 9th Floor, Dallas, Texas 75201,
and at any and all adjournments thereof, as set forth below.
This proxy is revocable and will be voted as directed, but if no
instructions are specified, the proxy will be voted:
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•
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FOR the nominees for director specified
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•
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FOR approval of the 2005 Long-Term Incentive Plan
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If any other business is presented at the annual meeting,
including whether or not to adjourn the meeting, the proxy will
be voted by those named in this proxy in their discretion. At
the present time, the board of directors knows of no other
business to be presented at the annual meeting.
(Continued and to be signed on reverse side)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH
OF THE NOMINEES FOR DIRECTOR
x
Please
mark your votes as indicated
Election as Directors of all Nominees (except as marked by
striking through
the Nominee’s name
below):
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o
FOR ALL NOMINEES
EXCEPT AS INDICATED
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VOTE WITHHELD FROM ALL
NOMINEES
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Peter B. Bartholow
Leo Corrigan, III
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Joseph M. (Jody) Grant
Frederick B. Hegi, Jr.
James R. Holland, Jr.
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George F. Jones, Jr.
Larry A. Makel
Walter W. McAllister III
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Lee Roy Mitchell
Steven P. Rosenberg, Jr.
John C. Snyder
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Robert W. Stallings
James C. Thompson, Jr.
Ian J. Turpin
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Approval of the 2005 Long-Term Incentive Plan
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FOR
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AGAINST
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ABSTAIN
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Please complete, date, sign, and promptly mail this proxy in
the enclosed postage-paid envelope.
Please sign exactly as
your name appears on the label on the reverse side of this card.
When signing as attorney, executor, administrator, trustee, or
guardian, please give your full title. If shares are held
jointly, each holder may sign but only one signature is required.
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The Undersigned acknowledges receipt from Texas Capital
Bancshares, Inc. prior to the execution of this proxy of a
Notice of Annual Meeting of Stockholders dated April 15,
2005, a Proxy Statement dated April 15, 2005, and the
Annual Report on Form 10-K for the year ended
December 31, 2004.
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Signature of Stockholder
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Date
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Signature of Stockholder
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Date
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