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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HALLMARK CAPITAL CORP.
- - -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
HALLMARK CAPITAL CORP.
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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[LOGO]
7401 WEST GREENFIELD AVENUE
WEST ALLIS, WISCONSIN 53214
(414) 778-4600
September 18, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
(the "Annual Meeting") of Hallmark Capital Corp. (the "Company"), the holding
company for West Allis Savings Bank (the "Bank"), which will be held on
Thursday, October 24, 1996, at 7:00 p.m., Milwaukee, Wisconsin time, at the
Pettit National Ice Center, Hall of Fame Room, 500 South 84th Street, West
Allis, Wisconsin 53214.
The attached Notice of Annual Meeting of Shareholders and Proxy
Statement describe the formal business to be conducted at the Annual Meeting.
We also have enclosed a copy of the Company's Summary Annual Report and Annual
Report on Form 10-K for the fiscal year ended June 30, 1996. Directors and
officers of the Company, as well as representatives of KPMG Peat Marwick LLP,
the Company's independent auditors, will be present at the Annual Meeting to
respond to any questions that our shareholders may have.
The vote of every shareholder is important to us. Please sign and
return the enclosed appointment of proxy form ("Proxy") promptly in the postage
- - -paid envelope provided, regardless of whether you are able to attend the Annual
Meeting in person. If you attend the Annual Meeting, you may vote in person
even if you have already mailed your Proxy.
On behalf of the Board of Directors and all of the employees of the
Company and the Bank, I wish to thank you for your continued support.
Sincerely yours,
James D. Smessaert
President and Chief Executive Officer
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[LOGO]
7401 WEST GREENFIELD AVENUE
WEST ALLIS, WISCONSIN 53214
(414) 778-4600
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 24, 1996
----------------------------------------
TO THE HOLDERS OF COMMON STOCK OF HALLMARK CAPITAL CORP.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of Hallmark Capital Corp. (the "Company") will be held on
Thursday, October 24, 1996, at 7:00 p.m., Milwaukee, Wisconsin time, at the
Pettit National Ice Center, Hall of Fame Room, 500 South 84th Street, West
Allis, Wisconsin 53214.
The Annual Meeting is for the purpose of considering and voting upon
the following matters, all of which are set forth more completely in the
accompanying Proxy Statement:
1. The election of two directors for a three-year term, and in
each case until their successors are elected and qualified;
2. The ratification of the appointment of KPMG Peat Marwick LLP
as independent auditors of the Company for the fiscal year
ending June 30, 1997; and
3. Such other matters as may properly come before the Annual
Meeting or any adjournments or postponements thereof. The
Board of Directors is not aware of any other such business.
The Board of Directors has established September 11, 1996, as the
record date for the determination of shareholders entitled to notice of and to
vote at the Annual Meeting and any adjournments or postponements thereof. Only
shareholders of record as of the close of business on that date will be
entitled to vote at the Annual Meeting or any adjournments or postponements
thereof. In the event there are not sufficient votes for a quorum or to
approve or ratify any of the foregoing proposals at the time of the Annual
Meeting, the Annual Meeting may be adjourned or postponed in order to permit
further solicitation of proxies by the Company.
BY ORDER OF THE BOARD OF DIRECTORS,
West Allis, Wisconsin Peter A. Gilbert
September 18, 1996 Executive Vice President and
Corporate Secretary
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY FORM PROMPTLY IN THE ENVELOPE PROVIDED.
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[LOGO]
7401 WEST GREENFIELD AVENUE
WEST ALLIS, WISCONSIN 53214
(414) 778-4600
---------------------------------
PROXY STATEMENT
---------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 24, 1996
---------------------------------------------
This Proxy Statement is being furnished to holders of common stock,
$1.00 par value per share (the "Common Stock") of Hallmark Capital Corp.
(the "Company") in connection with the solicitation on behalf of the Board of
Directors of the Company of proxies to be used at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held on Thursday, October 24, 1996,
at 7:00 p.m., Wisconsin time, at the Pettit National Ice Center, 500 South 84th
Street, West Allis, Wisconsin and at any adjournments or postponements
thereof.
The 1996 Summary Annual Report to Shareholders and the Company's
Annual Report on Form 10-K, including the consolidated financial statements for
the fiscal year ended June 30, 1996, accompanies this Proxy Statement and
appointment of proxy form (the "Proxy"), which are first being mailed to
shareholders on or about September 18, 1996.
Only shareholders of record as of the close of business on September
11, 1996 (the "Voting Record Date") will be entitled to vote at the Annual
Meeting. On the Voting Record Date, there were 1,442,950 shares of Common
Stock outstanding and entitled to vote, and the Company had no other class of
securities outstanding.
The presence, in person or by Proxy, of the holders of at least a
majority of the total number of shares of Common Stock entitled to vote is
necessary to constitute a quorum at the Annual Meeting. As to the election of
directors, the Proxy being provided by the Board of Directors enables a
director to vote for the election of the nominees proposed by the Board, or to
withhold authority to vote for one or more of the nominees being proposed.
Under the Wisconsin Business Corporation Law, directors are elected by a
plurality of the votes cast with a quorum present and shareholders do not have
the right to cumulate their votes for the election of directors unless the
articles of incorporation provide otherwise. The Company's Articles of
Incorporation do not provide cumulative voting rights for the election of
directors. The affirmative vote of a majority of the total votes cast in
person or by Proxy is necessary to ratify the appointment of KPMG Peat Marwick
LLP as independent auditors for the fiscal year ending June 30, 1997.
Abstentions are included in the determination of shares present and voting for
purposes of whether a quorum exists, while broker non-votes are not. Neither
abstentions nor broker non-votes are counted in determining whether a matter
has been approved. In the event there are not sufficient votes for a quorum or
to approve or ratify any proposal at the time of the Annual Meeting, the Annual
Meeting may be adjourned or postponed in order to permit the further
solicitation of proxies.
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As provided in the Company's Articles of Incorporation, record holders
of Common Stock who beneficially own in excess of 10% of the outstanding shares
of Common Stock (the "10% Limit") are not entitled to any vote in respect of
the shares held in excess of the 10% Limit. A person or entity is deemed to
beneficially own shares owned by an affiliate of, as well as such persons
acting in concert with, such person or entity. However, no director or officer
of the Company shall be deemed to beneficially own any Common Stock
beneficially owned by any other director or officer, solely by reason of any or
all of such directors or officers acting in their capacities as such. The
Company's Articles of Incorporation authorize the Board (i) to make all
determinations necessary to implement and apply the 10% Limit, including
determining whatever persons or entities are acting in concert, and (ii) to
demand that any person who is reasonably believed to beneficially own stock in
excess of the 10% Limit supply information to the Company to enable the Board
to implement and apply the 10% Limit. The provisions of the Company's Articles
of Incorporation relating to the 10% Limit do not apply to an acquisition of
more than 10% of the shares of Common Stock if such acquisition has been
approved by a majority of disinterested directors; provided such approval shall
be effective only if obtained at a meeting where a quorum of disinterested
directors is present.
Shareholders are requested to vote by completing the enclosed Proxy and
returning it signed and dated in the enclosed postage-paid envelope.
Shareholders are urged to indicate their votes in the spaces provided on the
Proxy. Proxies solicited by the Board of Directors of the Company will be
voted in accordance with the directions given therein. Where no instructions
are given, signed proxies will be voted FOR the election of each of the
nominees for director named in this Proxy Statement and FOR the ratification of
the appointment of KPMG Peat Marwick LLP as independent auditors of the Company
for the fiscal year ending June 30, 1997. In the event other matters properly
come before the Annual Meeting or any adjournments or postponements thereof,
including, without limitation, a motion to adjourn the Annual Meeting in order
to permit further solicitation of proxies by the Company, the proxies will be
entitled to vote as they, in their discretion, deem appropriate. Returning
your completed Proxy will not prevent you from voting in person at the Annual
Meeting should you be present and wish to do so.
Any shareholder giving a Proxy has the power to revoke it any time
before it is exercised by (i) filing with the Secretary of the Company written
notice thereof (Peter A. Gilbert, Corporate Secretary, Hallmark Capital Corp.,
7401 West Greenfield Avenue, West Allis, Wisconsin 53214); (ii) submitting a
duly executed Proxy bearing a later date; or (iii) appearing at the Annual
Meeting and giving the Secretary notice of his or her intention to vote in
person. If you are a shareholder whose shares are not registered in your own
name, you will need additional documentation from your record holder to vote
personally at the Annual Meeting. Proxies solicited hereby may be exercised
only at the Annual Meeting and any adjournment or postponement thereof and will
not be used for any other meeting.
The cost of solicitation of proxies by mail on behalf of the Board of
Directors will be borne by the Company. The Company has retained Morrow &
Company, Inc., a professional proxy solicitation firm, to assist in the
solicitation of proxies. Morrow & Company, Inc. will be paid a fee of $3,500,
plus reimbursement for out-of-pocket expenses. Proxies also may be solicited
by personal interview or by telephone, in addition to the use of the mails by
directors, officers and regular employees of the Company and West Allis Savings
Bank (the "Bank"), without additional compensation therefor. The Company also
has made arrangements with brokerage firms, banks, nominees and other
fiduciaries to forward proxy solicitation materials for shares of Common Stock
held of record by the beneficial owners of such shares. The Company will
reimburse such holders for their reasonable out-of-pocket expenses.
Proxies solicited hereby will be referred to the Board of Directors,
and will be tabulated by inspectors of election designated by the Board of
Directors, who will not be employed by, or a director of, the Company or any of
its affiliates.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of shares of
Common Stock as of August 31, 1996 (except as noted otherwise below) by (i)
each shareholder known to the Company to beneficially own more than 5% of the
shares of Common Stock outstanding, as disclosed in certain reports regarding
such ownership filed with the Company and with the Securities and Exchange
Commission (the "SEC") in accordance with Sections 13(d) or 13(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) each
director of the Company, (iii) each director nominee of the Company; (iv) the
executive officers of the Company appearing in the Summary Compensation Table
below, and (v) all directors and executive officers as a group. Members of the
Board of Directors of the Company also serve as directors of the Bank.
NUMBER OF SHARES
BENEFICIALLY
NAME OWNED (1) PERCENT OF CLASS
---- -------------------- ----------------
West Allis Savings Bank Employee Stock
Ownership Trust (5) . . . . . . . . . . . . . . . 94,908 6.58%
Financial Institution Partners, L.P./ Hovde
Capital, Inc. (6) . . . . . . . . . . . . . . . . 122,000 8.45
Heartland Advisors, Inc.(7) . . . . . . . . . . . . 92,000 6.38
James D. Smessaert (2)(3)(4) . . . . . . . . . . . . 91,885 6.20
Floyd D. Brink (2)(3) . . . . . . . . . . . . . . . 34,241 2.35
Milton Dalin (2)(3) . . . . . . . . . . . . . . . . 27,991 1.92
Reginald M. Hislop, III . . . . . . . . . . . . . . 100 *
Charles E. Rickheim (2)(3) . . . . . . . . . . . . . 67,741 4.65
Jerome A. Weitzer (2)(3) . . . . . . . . . . . . . . 34,241 2.25
Donald A. Zellmer . . . . . . . . . . . . . . . . . - -
Peter A. Gilbert (3) . . . . . . . . . . . . . . . . 29,482 2.04
All directors and executive officers
as a group (10 persons) (2)(3)(4) . . . . . . . . 340,816 21.68%
- - --------------------
* Amount represents less than 1.0% of the total shares of Common Stock
outstanding.
(1) Unless otherwise indicated, includes shares of Common Stock held directly
by the individuals as well as by members of such individuals' immediate
family who share the same household, shares held in trust and other
indirect forms of ownership over which shares the individuals exercise
sole or shared voting power and/or investment power. Fractional shares
of Common Stock held by certain executive officers under the West Allis
Savings Bank Employee Stock Ownership Plan (the "ESOP") have been rounded
to the nearest whole share.
(2) Includes shares of Common Stock which the named individuals and certain
executive officers have the right to acquire within 60 days of the Voting
Record Date pursuant to the exercise of stock options: Mr. Smessaert -
38,100 shares and Mr. Gilbert - 3,400 shares.
(3) Includes shares of Common Stock awarded to certain executive officers and
directors under the West Allis Savings Bank Management Recognition and
Retention Plan (the "MRP"). Recipients of awards under the MRP may
direct voting prior to vesting.
(4) Includes shares of Common Stock allocated to certain executive officers
under the ESOP, of which approximately 3,231 shares were allocated to Mr.
Smessaert.
(5) First Bank Milwaukee, N.A. (the "Trustee") is the trustee for the ESOP.
The Trustee's address is 201 West Wisconsin Avenue, Milwaukee, Wisconsin
53202.
(6) Based upon a Schedule 13D, dated February 29, 1996, filed with the
Company pursuant to the Exchange Act by Financial Institution Partners,
L. P. and Hovde Capital, Inc. Hovde Capital, Inc. is the general partner
of Financial Institution Partners, L.P. and their business office is
located at 1110 Lake Cook Road, Suite 165, Buffalo Grove, IL 60089.
(7) Based upon a Schedule 13G, dated February 15, 1995, filed with the
Company pursuant to the Exchange Act by Heartland Advisors, Inc., an
investment adviser registered under the Investment Advisers Act of 1940,
as amended, reporting the beneficial ownership of shares over which they
have the sole dispositive power. The principal business office of
Heartland Advisors, Inc. is located at 790 North Milwaukee Street,
Milwaukee, Wisconsin 53202.
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MATTERS TO BE VOTED ON AT THE ANNUAL MEETING
MATTER 1.
ELECTION OF DIRECTORS
Pursuant to the Articles of Incorporation of the Company, at the first
annual meeting of shareholders of the Company held on October 28, 1994,
directors of the Company were divided into three classes as equal in number as
possible. Directors of the first class were elected to hold office for a term
expiring at the first succeeding annual meeting, directors of the second class
were elected to hold office for a term expiring at the second succeeding annual
meeting, and directors of the third class were elected to hold office for a
term expiring at the third succeeding annual meeting, and in each case until
their successors are elected and qualified. At each subsequent annual meeting
of shareholders, one class of directors, or approximately one-third of the
total number of directors, are to be elected for a term of three years. There
are no family relationships among the directors and/or executive officers of
the Company. No person being nominated as a director is being proposed for
election pursuant to any agreement or understanding between any person and the
Company.
Unless otherwise directed, each Proxy executed and returned by a
shareholder will be voted FOR the election of the nominees for director listed
below. If any person named as nominee should be unable or unwilling to stand
for election at the time of the Annual Meeting, the proxies will nominate and
vote for any replacement nominee or nominees recommended by the Board of
Directors. At this time, the Board of Directors knows of no reason why any of
the nominees listed below may not be able to serve as a director if elected.
The following tables present information concerning the nominees for
director and continuing directors. All of the proposed nominees currently
serve as directors of the Bank. Floyd D. Brink has served as a director of the
Company since the Company's formation in June 1993. The Board of Directors has
nominated Mr. Donald A. Zellmer to fill the vacancy created by the retirement
of Mr. Milton Dalin whose term expires at the Annual Meeting.
POSITION WITH THE COMPANY DIRECTOR
AND PRINCIPAL OCCUPATION OF THE BANK
NAME AGE DURING THE PAST FIVE YEARS SINCE
---- --- -------------------------- ------------
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERM EXPIRING IN 1999
Floyd D. Brink 70 Director of the Company and the Bank; 1969
Retired President and owner of West Allis Heating,
Inc., West Allis, Wisconsin.
Donald A. Zellmer 63 Retired Partner of Ernst & Young LLP, Milwaukee -
office; Director of St. Lukes Hospital, Milwaukee,
Wisconsin, and Aurora Health Care Services, Inc.,
a health care provider, located in Milwaukee, Wisconsin.
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POSITION WITH THE COMPANY DIRECTOR
AND PRINCIPAL OCCUPATION OF THE BANK
NAME AGE DURING THE PAST FIVE YEARS SINCE
---- --- ------------------------------------ ----------
INFORMATION WITH RESPECT TO CONTINUING DIRECTORS
DIRECTORS WHOSE TERMS EXPIRE IN 1997
Jerome A. Weitzer 74 Director of the Company and the Bank; Retired Vice 1972
President and Director of Weitzer Bros., Inc.,
a plumbing and heating contract company, located in
West Allis, Wisconsin.
James D. Smessaert 58 President, Chief Executive Officer and Chairman of 1984
the Board of the Company and the Bank.
DIRECTORS WHOSE TERMS EXPIRE IN 1998
Peter A. Gilbert 48 Director of the Company and the Bank; Executive 1955
Vice President, Chief Operating Officer and Corporate
Secretary of the Bank and Executive Vice President
and Corporate Secretary of the Company.
Reginald M. Hislop, III 36 Director of the Company and the Bank; President and 1955
Chief Executive Officer of The Village at Manor Park,
Inc., a diversified organization which provides
long-term care and specialized health care services
to senior adults, located in West Allis, Wisconsin.
Charles E. Rickheim 55 Director of the Company and the Bank; Owner and manager 1982
of residential real estate located in the State of
Wisconsin.
THE AFFIRMATIVE VOTE OF A PLURALITY OF THE VOTES CAST IS REQUIRED FOR
THE ELECTION OF DIRECTORS. UNLESS OTHERWISE SPECIFIED, THE SHARES OF COMMON
STOCK REPRESENTED BY THE PROXIES SOLICITED HEREBY WILL BE VOTED IN FAVOR OF THE
ELECTION OF THE ABOVE-DESCRIBED NOMINEES. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE FOR ELECTION OF THE NOMINEES FOR DIRECTOR.
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MATTER 2.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Company's independent auditors for the fiscal year ended June 30,
1996 were KPMG Peat Marwick LLP. The Board of Directors of the Company has
reappointed KPMG Peat Marwick LLP to perform the audit of the Company's
financial statements for the fiscal year ending June 30, 1997. Representatives
of KPMG Peat Marwick LLP will be present at the Annual Meeting and will be
given the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions from the Company's shareholders.
UNLESS MARKED TO THE CONTRARY, THE SHARES OF COMMON STOCK REPRESENTED
BY THE ENCLOSED PROXY WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT OF KPMG
PEAT MARWICK LLP, AS THE INDEPENDENT AUDITORS OF THE COMPANY. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF KPMG PEAT
MARWICK LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Company was organized on June 29, 1993. Regular meetings of the
Board of Directors of the Company generally are held on a quarterly basis.
During the fiscal year ended June 30, 1996, the Board of Directors of the
Company held four regular meetings and two special meetings. No incumbent
director attended fewer than 75% of the aggregate total number of meetings of
the Board of Directors held and the total number of committee meetings on which
such director served during the fiscal year ended June 30, 1996.
The Board of Directors of the Company has a standing Audit Committee
and Compensation Committee. The Audit Committee consists of Messrs. Floyd D.
Brink (Chairman), Milton Dalin and Jerome A. Weitzer. The Audit Committee
reviews the scope and timing of the audit of the Company's financial statements
by the Company's independent public accountants and will review with the
independent public accountants the Company's management policies and procedures
with respect to auditing and accounting controls. The Audit Committee also
will review and evaluate the independence of the Company's accountants, and
recommend to the Board the engagement, continuation or discharge of the
Company's accountants. In addition, the Audit Committee will direct the
activities of the Bank's internal audit. The Company's Audit Committee met
once during the fiscal year ended June 30, 1996.
The Board of Directors of the Bank has established a Compensation
Committee consisting of three directors, Messrs. Charles E. Rickheim
(Chairman), Milton Dalin and Reginald M. Hislop, III who are neither officers
nor employees of the Company or the Bank ("Outside Directors"). During the
fiscal year ended June 30, 1996, the Company did not pay separate compensation
to its executive officers. The Compensation Committee of the Company met in
December of 1995, and in July of 1996 to review and approve the compensation
decisions made by the Compensation Committee of the Bank and to issue the Joint
Compensation Committee Report which appears in this Proxy Statement.
The Company's Nominating Committee, consisting of Jerome A. Weitzer
(Chairman), Reginald M. Hislop, III and Milton Dalin, met on June 20, 1996.
The Company's By-laws allow for shareholder nominations of directors and
require such nominations be made pursuant to timely notice in writing to the
Secretary of the Company. See "Shareholder Proposals for the 1997 Annual
Meeting."
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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
During the fiscal year ended June 30, 1996, the Company did not pay
separate compensation to its officers. Separate compensation will not be paid
to officers of the Company until such time as the officers of the Company
devote significant time to separate management of Company affairs, which is not
expected to occur until the Company becomes actively involved in additional
business beyond the Bank. The following table summarizes the total
compensation paid by the Bank to its Chief Executive Officer during the Bank's
fiscal years ended June 30, 1994, 1995 and 1996 and to the Bank's next highest
paid officer whose compensation salary and bonus (annualized) exceeded $100,000
during fiscal 1996 and 1995.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION AWARDS
---------------------- ------------------------
VALUE OF NUMBER
RESTRICTED OF SHARES
STOCK SUBJECT TO ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) AWARDS(3) OPTIONS(4) COMPENSATION(5)
- - --------------------------- ---- ------ -------- ----------- ----------- ---------------
James D. Smessaert............... 1996 $116,000 $25,984 -- 3,000 $25,065
President and Chief Executive 1995 111,800 -- -- -- 21,060
Officer and Director of the 1994 110,000 22,928 $252,992 55,343 --
Company and the Bank
Peter A. Gilbert(6).............. 1996 $ 93,000 $18,228 -- 2,000 --
Executive Vice President & 1995 91,000 9,328 $43,000 15,000 --
Corporate Secretary of the
Company, Executive Vice
President/Chief Operating
Officer and Corporate Secretary
of the Company and the Bank
- - -----------------------------
(1) Perquisites provided to Messrs. Smessaert and Gilbert by the Company did
not exceed the lesser of $50,000 or 10% of total annual salary and bonus
during the fiscal years indicated and accordingly, are not included.
(2) Bonuses paid to Messrs. Smessaert and Gilbert in fiscal 1996 were based
upon the terms set forth under the West Allis Savings Bank Annual Incentive
Plan (the "Incentive Plan"). See "Annual Incentive Plan." The bonus paid
to Mr. Gilbert in fiscal 1995 was based upon an interim bonus arrangement
for the period from January 1, 1995 to June 30, 1995 established at the
time he was hired. For fiscal 1994, the Bank paid Mr. Smessaert a bonus
based on an incentive compensation program which measured the Bank's
performance compared to a peer group of thrifts.
(3) Amounts shown in this column represent the value of vested and unvested
shares of Common Stock awarded under the West Allis Savings Bank Management
Recognition and Retention Plan (the "MRP"). The amounts shown for Messrs.
Smessaert and Gilbert were calculated by multiplying the value of the
Common Stock on the date of grant (Mr. Smessaert - $8.00; Mr. Gilbert -
$10.75) by the number of shares of Common Stock awarded. The number and
the vesting schedule of the shares of Common Stock awarded are as follows:
(i) Mr. Smessaert - 6,325 (12/30/94); 6,325 (12/30/95); 6,325 (12/30/96);
6,325 (12/30/97); and 6,324 (12/30/98); (ii) Mr. Gilbert - (i) 800
(1/1/96); (ii) 800 (1/1/97); (iii) 800 (1/1/98); (iv) 800 (1/1/99); and (v)
800 (1/1/00). Recipients of awards under the MRP are entitled to payment
of any dividends on unvested shares. The value of the vested and unvested
MRP shares held by Messrs. Smessaert and Gilbert at June 30, 1996 was
$308,985 and $60,000, respectively, based on 20,599 shares and 4,000 shares
respectively, and the value of the Common Stock on that date ($15.00 per
share).
(4) Amounts shown in this column represent the total number of shares of Common
Stock subject to options granted (both vested and unvested) under the
Hallmark Capital Corp. 1993 Incentive Stock Option Plan (the "Option
Plan"). The options awarded are subject to a vesting schedule under the
Option Plan and are exercisable as follows: (i) Mr. Smessaert: 12,500
(12/30/93); 12,500 (12/30/94); 12,500 (12/30/95); 600 (8/1/96); 12,500
(12/30/96); 600 (8/1/97); 5,343 (12/30/97); 600 (8/1/98); 600 (8/1/99); and
600 (8/1/00); and (ii) Mr. Gilbert: 3,000 (12/31/95); 400 (8/1/96); 3,000
(12/31/96); 400 (8/1/97); 3,000 (12/31/97); 400 (8/1/98); 3,000 (12/31/98);
400 (8/1/99); 3,000 (12/31/99); 400 (8/1/99); 3,000 (12/31/99); and 400
(8/1/00).
(5) Amounts shown in this column represent the Bank's contributions on behalf
of Mr. Smessaert under the ESOP for the fiscal years ended June 30, 1995
and 1996.
(6) Mr. Gilbert was hired on December 31, 1994; the salary amount indicated for
fiscal 1995 has been annualized.
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EMPLOYMENT AGREEMENTS
In connection with the conversion of the Bank from a state-chartered
mutual savings bank to a state-chartered stock savings bank (the "Conversion"),
the Bank entered into a three-year employment agreement with Mr. Smessaert,
President and Chief Executive Officer of the Bank, and on December 31, 1994,
the Bank entered into three-year employment agreement with Mr. Peter A.
Gilbert, Executive Vice President/Chief Operating Officer and Corporate
Secretary of the Bank. The terms of each of their employment agreements may be
restored to three years by action of the Bank's Board of Directors, subject to
the Board's annual performance evaluation. The employment agreements are
intended to ensure that the Bank maintains stable and competent management.
Under the employment agreements, the current base salaries for Messrs.
Smessaert and Gilbert are $150,700 and $120,250, respectively. The base
salaries may be increased by the Bank's Board of Directors, but may not be
reduced except as part of a general pro rata reduction in compensation for all
executive officers. In addition to base salary, the employment agreements
provide for payments from other Bank incentive compensation plans, and provide
for other benefits, including participation in any group health, life,
disability, or similar insurance program and in any pension, profit-sharing,
employee stock ownership plan, deferred compensation, 401(k) or other
retirement plans maintained by the Bank. The employment agreements also
provide for participation in any stock-based incentive programs made available
to executive officers of the Bank. The employment agreements may be terminated
by the Bank upon death, disability, retirement, or for cause at any time, or in
certain events specified by the regulations of the Wisconsin Department of
Financial Institutions, Division of Savings and Loan. If the Bank terminates
the employment agreements for any reasons other than due to death, disability,
retirement or for cause, Messrs. Smessaert and Gilbert are entitled to a
severance payment equal to one year's base salary (based on the highest base
salary within the three years preceding the date of termination) together with
other compensation and benefits in which they were vested at the termination
date.
The employment agreements provide for severance payments if Mr.
Smessaert's or Mr. Gilbert's employment terminates following a change in
control. Under the employment agreements, a "Change in Control" is generally
defined to include any change in control required to be reported under the
federal securities laws as well as (i) the acquisition by any person of 25% or
more of the Company's outstanding voting securities, or (ii) a change in a
majority of the directors of the Company during any two-year period without
approval of at least two-thirds of the persons who were directors at the
beginning of such period. Within the greater of twelve months or the remaining
employment term at the effective date of any Change in Control, Messrs.
Smessaert and Gilbert have the option of receiving as severance: (i) the
amount payable if the Bank terminated employment for reasons other than death,
disability, retirement or for cause; or (ii) an amount equal to the salary
payments for the then-remaining employment term (which at the executive's
election may be payable in one lump sum). In either case, Messrs. Smessaert
and Gilbert are entitled to all qualified retirement and other benefits in
which they were vested. If the severance benefits payable following a Change
in Control would constitute "parachute payments" within the meaning of Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), and the present value of such "parachute payments" equals or
exceeds three times their average annualized includable income for the five
calendar years preceding the year in which a Change in Control occurred, the
severance benefits will be reduced to an amount equal to the present value of
2.99 times the average annual compensation paid to Messrs. Smessaert and
Gilbert during the five years immediately preceding such Change in Control.
EXECUTIVE EMPLOYEE SALARY CONTINUATION AGREEMENT
In August 1992, the Bank and Mr. Smessaert entered into an Executive
Employee Salary Continuation Agreement (the "Continuation Agreement").
Pursuant to the Continuation Agreement, the Bank agreed to pay Mr. Smessaert an
annual benefit of $50,000 upon his retirement at age 65. In the event Mr.
Smessaert retires between the ages of 60 and 65, the Continuation Agreement
provides for a reduced annual benefit until attainment of age 65. The
Continuation Agreement provides that in the event of Mr. Smessaert's death,
either while employed at the Bank or after his retirement, the Bank will pay
his designated beneficiary approximately $650,000 payable in equal monthly
installments over a 13- year period. The Continuation Agreement does not
provide for payments upon voluntary termination of employment, discharge for
cause or termination of employment upon disability (prior to age 60). However,
notwithstanding Mr. Smessaert's termination of employment due to disability,
the Continuation
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12
Agreement provides that if Mr. Smessaert's disability continues to or occurs
after attainment of age 60, Mr. Smessaert may elect to receive reduced annual
benefits until reaching the age of 65 with eligibility for full benefits under
the Continuation Agreement thereafter.
The Continuation Agreement provides for payment of $50,000 per year
for three years in equal monthly installments upon Mr. Smessaert's involuntary
termination of employment or termination of his employment following a change
in control. "Involuntary termination of employment" is defined as Mr.
Smessaert's cessation of employment due to the Bank's significantly lessening
either his title, duties, responsibilities, compensation or altering his situs
of employment, without his consent. Mr. Smessaert's compensation shall be
deemed to be significantly lessened if any employment reduction is imposed
except as part of an overall employment reduction applied proportionately to
all of the Bank's management employees or if Mr. Smessaert fails to receive
periodic compensation increases substantially proportionate to and coincident
with the increases granted to other executive officers. "Change in control" is
defined as set forth in Section 280G(b)(2) of the Internal Revenue Code. In
October 1991, the Bank purchased two single-premium annuity policies on the
life of Mr. Smessaert designating the Bank as beneficiary to fund the Bank's
anticipated obligations under the Continuation Agreement.
ANNUAL INCENTIVE PLAN
In August 1995, the Board of Directors of the Bank adopted the West
Allis Savings Bank Annual Incentive Plan (the "Incentive Plan") which was
effective for the fiscal year ending June 30, 1996. The Incentive Plan is
designed to provide annual incentive opportunity targets that are consistent
with the Bank's executive compensation philosophy and current competitive
median market compensation practices. Under the Incentive Plan for fiscal
1996, the Chief Executive Officer, Executive Vice President/Chief Operating
Officer and Senior Vice Presidents of the Bank earned incentive compensation if
the Company achieved targets set by the Compensation Committee on an annual
basis for ROAE of the Company. The amount of incentive compensation earned was
a percentage of each officer's base salary and was dependent upon whether the
Company achieved threshold, target and maximum levels of ROAE. The threshold,
target and maximum ROAE levels and the corresponding percentages of base salary
applicable to computation of incentive compensation was established at the
beginning of each fiscal year by the Compensation Committee of the Company. If
the financial performance of the Company is such that the threshold ROAE level
is not achieved, no incentive compensation will be earned. For fiscal 1997,
the Board of Directors revised the Incentive Plan to provide that the Company
performance measures will be threshold, target and maximum levels of net income
rather than ROAE used for fiscal 1996. All other terms of the Incentive Plan,
including percentages of base salary at each level, will be the same for fiscal
1997 as for fiscal 1996. For fiscal 1997, if the threshold level set for net
income is achieved, the Incentive Plan provides for incentive payments as
follows: (i) 20.0% of the Chief Executive Officer's base salary; (ii) 17.50%
of the Executive Vice President/Chief Operating Officer's base salary; and
(iii) 12.50% of the Senior Vice Presidents' base salaries. If the target level
set for net income is achieved, the Incentive Plan provides for incentive
payments as follows: (i) 40.0% of the Chief Executive Officer's base salary;
(ii) 35.0% of the Executive Vice President/Chief Operating Officer's base
salary; and (iii) 25.0% of the Senior Vice Presidents' base salaries. If the
maximum level set for net income is achieved, the Incentive Plan provides for
incentive payments as follows: (i) 60.0% of the Chief Executive Officer's base
salary; (ii) 52.50% of the Executive Vice President/Chief Operating Officer's
base salary; and (iii) 37.50% of the Senior Vice Presidents' base salaries.
Incentive payments for achievement of net income at levels within the range set
by the threshold, target and maximum levels will be based upon interpolated
percentages. Incentive compensation will not exceed the percentages of base
salary set for the maximum net income level if the Company's net income exceeds
the maximum net income level. The Incentive Plan will be administered by the
Compensation Committee of Board of Directors of the Bank. Prior to the payment
of incentive compensation, the Compensation Committee of the Board of Directors
will certify that the net income levels were achieved.
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13
INCENTIVE STOCK OPTION PLAN
In connection with the Conversion, the Board of Directors of the
Company adopted the Hallmark Capital Corp. 1993 Incentive Stock Option Plan
(the "Option Plan"). All officers and employees of the Company and its
subsidiaries are eligible to participate in the Option Plan. At June 30, 1996,
the Company and its subsidiaries had 59 eligible officers and employees. The
Option Plan authorizes the grant of (i) options to purchase shares of Common
Stock intended to qualify as incentive stock options under Section 422A of the
Internal Revenue Code ("Incentive Stock Options"), (ii) options that do not so
qualify ("Non-Statutory Options"), and (iii) options which are exercisable only
upon a change in control of the Company or the Bank ("Limited Rights").
Options for a total of 134,410 shares of Common Stock were made available for
granting to eligible participants under the Option Plan, and options to
purchase 8,631 shares of Common Stock remained available for future grant at
June 30, 1996.
The following table sets forth certain information concerning
individual grants of stock options under the Option Plan to the named executive
officers of the Company during the fiscal year ended June 30, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- - ---------------------------------------------------------------------------------------------------------------------------
% OF TOTAL
OPTIONS PER SHARE
GRANTED TO EXERCISE PRICE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR(1) ($/SH) DATE VALUE(2)
-------- ---------- -------------- -------------- ------------ ----------
James D. Smessaert . . . 3,000 42.9% $14.50 08/01/05 $7,230
Peter A. Gilbert . . . . 2,000 28.6% 14.50 08/01/05 4,820
----------
(1) The options granted are subject to a vesting schedule under the
Option Plan and are exercisable as follows: (i) James D.
Smessaert: 600 - (8/1/96); 600 - (8/1/97); 600 - (8/1/98);
600 - (8/1/99); 600 - (8/1/00); (ii) Peter A. Gilbert: 400 -
(8/1/96); 400 - (8/1/97); 400 - (8/1/98); 400 - (8/1/99); 400 -
(8/1/00). Options to purchase 7,000 shares of Common Stock were
granted to eligible participants under the Option Plan during the
fiscal year ended June 30, 1996.
(2) Based upon the Black-Scholes option pricing model, adopted for use
in valuing stock options, based upon the following variable
assumptions: (i) a ten year option term; (ii) a volatility
statistic of 29.2%; (iii) a dividend yield of 6.70% representing
the current return on equity of the Company; and (iv) a
risk-free rate of return of 7.20% representing the interest rate
on a U.S. Treasury security with a ten year maturity on the date
of grant. The actual value, if any, an executive may realize will
depend upon the excess of the stock price over the exercise price
on the date the option is exercised. There is no assurance the
value realized will be at or near the value estimated by the
Black-Scholes model.
-10-
14
The following table sets forth certain information concerning the
exercise of stock options granted under the Option Plan by the named executive
officers during the fiscal year ended June 30, 1996, and the value of their
unexercised stock options at June 30, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
NUMBER OF OPTIONS IN-THE-MONEY
SHARES AT OPTIONS AT
ACQUIRED VALUE FISCAL YEAR END FISCAL YEAR END(1)
------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------- ----------- -------- ----------- ------------- ----------- -------------
James D. Smessaert.......... 0 $0 37,500 20,843 $262,500 $124,901
Peter A. Gilbert............ 0 0 3,000 14,000 12,000 49,000
- - -------------------------
(1) The value of Unexercised In-the-Money Options is based upon the
difference between the fair market value of the securities underlying
the options ($15.00) at June 30, 1996 and the exercise price of the
options (Mr. Smessaert - 55,343 shares at $8.00; 3,000 shares at
$14.75; and Mr. Gilbert - 15,000 shares at $11.00; 2,000 shares at
$14.75).
The Compensation Committee of the Company determines the expiration
date (but not later than ten years from the date the option is granted) and the
exercise price of the options. The exercise price may be paid in cash or
shares of Common Stock. No options may be granted under the Option Plan
following the tenth anniversary of the effective date of the Option Plan.
Options are transferable only by will or the laws of descent and distribution
and, with respect to Non-Statutory Options, to a member of the optionee's
family or a trust created for the benefit of the optionee's immediate family.
Except as noted below, the exercise price at the time of the grant of the
options will be at least 100% of the fair market value of the underlying shares
of Common Stock. Under the Option Plan, the Company may issue replacement
options in exchange for previously granted Non-Statutory Options at exercise
prices that may be less than the previous exercise price, but may not be less
than 85% of the fair market value of the Common Stock on the date such
replacement options are granted.
Incentive Stock Options granted to any person who is the beneficial
owner of more than 10% of the outstanding shares of Common Stock may be
exercised only for a period of five years following the date of grant and the
exercise price at the time of grant must be equal to at least 110% of the fair
market value of the Common Stock on the date of the grant. Incentive Stock
Options will be vested over the period of years necessary to allow such options
to qualify as Incentive Stock Options. For options to qualify as Incentive
Stock Options, the fair market value of shares of Common Stock, with respect to
which such Incentive Stock Options are exercisable for the first time in any
calendar year, cannot exceed $100,000.
No option granted in connection with the Option Plan is exercisable
three months after the date on which the optionee ceases to perform services
for the Bank or the Company, except that in the event of death, disability or
retirement, options will be fully vested and may be exercisable for the
remainder of the option term. If an optionee ceases to perform services for
the Bank or the Company due to retirement, Incentive Stock Options exercised
more than three months following the date the optionee ceases to perform
services shall be treated as Non- Statutory Options. Options held by employees
terminated for cause will expire on the date of termination. Termination for
cause includes termination due to the intentional failure to perform stated
duties, breach of fiduciary duty involving personal dishonesty resulting in a
material loss to the Company, willful violations of law or the entry
-11-
15
of a final cease and desist order which results in a material loss to the
Company. Options will be immediately exercisable in the event of a change in
control. "Change in control" is defined to include the acquisition of
beneficial ownership of 20% or more of any class of equity security by a person
or group of persons acting in concert, a tender offer or exchange offer, merger
or other form of business combination, a sale of assets or a contested election
of directors which results in a change in control of a majority of the Board of
Directors of the Company. In the event of death, disability, retirement, or
other termination of employment, the Company, if requested by the employee, or
the employee's beneficiary, may elect to pay the employee or beneficiary in
exchange for cancellation of the option, the amount by which the fair market
value of the shares of Common Stock exceeds the exercise price of the option on
the date of the employee's termination of employment.
DIRECTORS' COMPENSATION
BOARD FEES
The Board of Directors of the Company meets at least quarterly and
received $250 for each regular or special Board meeting attended during the
fiscal year ended June 30, 1996. For the fiscal year ended June 30, 1996, each
member of the Board of Directors of the Bank received a $1,110 monthly meeting
fee. In addition, members of the Board of Directors of the Bank received an
additional fee of $425 for each special meeting attended during fiscal year
ended June 30, 1996.
DIRECTORS' EMERITUS PROGRAM
On July 20, 1994, the Bank adopted a Directors' Emeritus Program (the
"Emeritus Program") which provides for an annual payment equal to 50% of the
annual retainer fee paid to eligible directors. Under the Emeritus Program, an
eligible director is defined as a director whose service as a director
terminates on or after the director has attained age 70. Commencing July 1,
1996, the mandatory retirement age for directors of the Bank will be 70 which
will result in Messrs. Brink, Dalin and Weitzer no longer being eligible for
re-election upon expiration of their respective terms as directors of the Bank
in fiscal years 1996 and 1997. For eligible directors who have attained age 70
on or prior to July 1, 1996, the annual payments shall continue until the
eligible director's death. For eligible directors who have not attained age 70
on or prior to July 1, 1996, the annual payments shall continue until the
earlier of: (i) the eligible director's death; or (ii) five years from the date
the eligible director's board service shall have terminated.
In addition, each eligible director who attains age 70 on or prior to
July 1, 1996 shall receive health insurance (single and family coverage) under
the health plan maintained by the Bank until the eligible director's death.
Eligible directors who do not attain age 70 on or prior to July 1, 1996 shall
not be entitled to health insurance benefits under the Emeritus Program.
In the event of a Change in Control (as defined in the Emeritus
Program) of the Bank, or a merger or other business combination involving the
Bank in which the Bank is not the resulting entity, the rights and obligations
of the Bank under the Emeritus Program shall become the rights and obligations
of the successor or acquiring entity.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
In connection with the Conversion, the Board of Directors of the
Company adopted the Hallmark Capital Corp. 1993 Stock Option Plan for Outside
Directors of the Company and its Affiliates (the "Directors' Plan"). Options
to purchase 55,340 shares of Common Stock were made available for granting to
Outside Directors under the Directors' Plan, all of which were granted on the
date of consummation of the Conversion (December 30, 1993) with an exercise
price of $8.00 per share. The Directors' Plan is self-administered. All
options granted under the Directors' Plan expire upon the earlier of ten years
following the date the option was granted (i.e., December 29, 2003) or one year
following the date the optionee ceases to be a director. All options granted
under the Directors' Plan vested 100% upon consummation of the Conversion.
During the fiscal year ended June 30, 1994, the Outside Directors, Messrs.
Floyd D. Brink, Milton Dalin, Charles E. Rickheim and Jerome A. Weitzer, each
were granted options to purchase, at $8.00 per share, 13,835 shares of Common
Stock.
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COMPENSATION COMMITTEE REPORT
The Report of the Compensation Committee on Executive Compensation shall not be
deemed incorporated by reference by any general statement into any filing under
the Securities Act of 1933, as amended (the "Securities Act") or the Exchange
Act, except to the extent the Company specifically incorporates such
information by reference, and shall not otherwise be deemed filed under the
Securities Act or Exchange Act.
COMPENSATION COMMITTEE
I. ROLE OF THE COMPENSATION COMMITTEE
The Compensation Committee of Board of Directors of the Company and
the Bank consists of the same Outside Directors, Messrs. Charles E. Rickheim
(Chairman), Milton Dalin and Reginald M. Hislop, III. During the fiscal year
ended June 30, 1996, the Company did not pay separate compensation to its
executive officers. In December 1995 and July 1996, the Compensation Committee
of the Company met to review and approve compensation decisions made by the
Compensation Committee of the Bank and to issue this Joint Compensation
Committee Report. All executive officer compensation was paid by the Bank and
compensation policies were determined by the Compensation Committee of the
Bank. The term "Compensation Committee" in this report refers to the
Compensation Committee of the Company and the Bank.
II. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed entirely of independent Outside
Directors who are not former officers or employees of the Company or any of its
subsidiaries. There are no interlocks, as defined under the rules and
regulations of the SEC, between the Compensation Committee and corporate
affiliates of members of the Compensation Committee.
III. COMPENSATION COMMITTEE REPORT
Under rules established by the SEC, the Company is required to provide
certain data and information regarding the compensation and benefits provided
to the Company's Chief Executive Officer and certain other executive officers
of the Company. The rules require compensation disclosure in the form of
tables and a report of the Compensation Committee which explains the rationale
and considerations that led to fundamental compensation decisions affecting
such individuals. The Compensation Committee has prepared the following
report, at the direction and approval of the Board of Directors of the Company,
for inclusion in this Proxy Statement.
EXECUTIVE COMPENSATION PHILOSOPHY
The primary objective of the Company's executive compensation policy
is to attract and retain highly skilled and motivated executive officers who
will manage the Company and the Bank in a manner to promote growth and
profitability. In recommending and establishing levels of executive
compensation, it is the policy of the Compensation Committee to consider the
following factors: (i) the individual performance of the executive; (ii) the
executive's contribution to achievement of the strategic business plan of the
Company and the Bank; (iii) the executive's experience and responsibility level
during the present period and anticipated responsibilities during the following
fiscal year; and (iv) compensation levels for executives of comparable
financial institutions. The executive compensation program consists of three
elements: base salary and incentive compensation, long-term incentive
compensation and retirement and other benefits.
BASE SALARY AND INCENTIVE COMPENSATION
Base salary levels are designed to be competitive with cash
compensation levels paid to similar executives at financial institutions of
similar size, giving due consideration to the competitive market in which the
Company and the Bank operate. Prior to the Conversion, the Bank reviewed
executive salary studies and surveys prepared by an independent consultant to
obtain compensation data of comparable financial institutions and determined
base salary levels for executive officers to be effective upon consummation of
the Conversion. The peer group used in the compensation analysis consisted of
a different set of institutions than those which comprise the peer group index
-13-
17
(SNL Thrift Index) utilized in the Stock Performance Graph below. The salary
levels were designed to reflect the increased responsibilities associated with
being executive officers of a public company. Base salaries are subject to
review and adjustment by the Compensation Committee each year. In fiscal 1996,
the average increase in base salary for executive officers was 4.25%.
In connection with the Conversion, the Bank established the West Allis
Savings Bank Employee Stock Ownership Plan (the "ESOP") (discussed further
herein) in which all officers and employees of the Company and its subsidiaries
participate. In order to fund the ESOP, in fiscal 1994, the Bank eliminated a
Management Incentive Compensation Program which was in effect prior to the
Conversion pursuant to which executive officers of the Bank earned short-term
cash incentive compensation. In August 1995, the Board of Directors of the
Bank adopted the West Allis Savings Bank Annual Incentive Plan ("Incentive
Plan") which was effective for the fiscal year ending June 30, 1996. The
Incentive Plan is intended to replace the former Management Incentive
Corporation Program of the Bank and is intended to accomplish the following
objections: (i) reward key individuals for achieving pre-established financial
and non-financial goals that support the Company's and Bank's annual business
objectives; (ii) encourage and reinforce effective teamwork and individual
contributions toward Company and Bank goals; and (iii) provide an incentive
opportunity that will enable the Company and the Bank to attract, motivate and
retain outstanding executives. For fiscal 1996, the Company achieved an ROAE
level in excess of the threshold level of ROAE but less than the target level
of ROAE established by the Board under the Incentive Plan. Therefore,
incentive compensation paid to executive officers for fiscal 1996 was based
upon interpolated percentages of their base salaries established under the
Incentive Plan for achievement of ROAE in the range between the threshold and
target net income levels. For a further discussion of the Incentive Plan, see
"Annual Incentive Plan."
LONG-TERM INCENTIVE COMPENSATION
In fiscal 1994, executive officers of the Company and the Bank were
awarded restricted stock under the West Allis Savings Bank Management
Recognition and Retention Plan ("MRP") and stock options under the Hallmark
Capital Corp. 1993 Incentive Stock Option Plan (the "Option Plan") in
connection with the Conversion. The Bank established the MRP and the Option
Plan as a method of providing officers and employees of the Bank with a
proprietary interest in the Company and to encourage such persons to remain
with the Bank. All officers and employees of the Company are eligible to
participate in the MRP and the Option Plan. The restricted stock and option
awards are designed to align the financial interests of the Company's executive
officers more closely with the Company's shareholders. During fiscal 1996,
non- qualifying stock options to purchase 7,000 shares of Common Stock were
awarded to senior executive officers of the Company and the Bank.
RETIREMENT AND OTHER BENEFITS
In August 1992, the Bank and Mr. Smessaert entered into an Executive
Employee Salary Continuation Agreement (the "Continuation Agreement") which
provides for certain cash payments upon Mr. Smessaert's retirement. For a
further description of the Continuation Agreement, see "Compensation of
Executive Officers and Directors - Executive Employee Salary Continuation
Agreement." Additional retirement and other benefits provided to executive
officers, are the same as those benefits provided to all employees of the Bank,
including participation in the ESOP, the West Allis Savings Bank 401(k) Plan
(in which Mr. Smessaert does not participate) and comprehensive health
insurance, life insurance and short-term and long-term disability insurance.
Under the ESOP, benefits may be payable upon death, retirement, early
retirement, disability or separation from service. Benefits may be paid either
in shares of Common Stock or in cash. In connection with the Conversion, the
ESOP borrowed funds from the Company to purchase 126,500 shares of Common
Stock, and collateral for the loan is the Common Stock purchased by the ESOP.
On March 15, 1996, the Bank contributed $182,116 to the ESOP and allocations of
shares of Common Stock were based upon compensation paid to participants for
the year ended December 31, 1995.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation paid to the President and Chief Executive Officer of
the Company and the Bank, James D. Smessaert, during the fiscal year ended June
30, 1996 was consistent with the Company's overall executive compensation
philosophy. Based upon the compensation philosophy of the Bank, Mr.
Smessaert's base salary under his employment agreement was increased to
$118,400 effective January 1, 1996. Bonus compensation paid to Mr. Smessaert
for the fiscal year ended June 30, 1996 under the Incentive Plan totaled
$25,984.
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PERFORMANCE GRAPH
The following graph shows semi-annual comparisons of the Company's
cumulative shareholder return on the Common Stock with (i) the cumulative total
return on stocks included in the National Association of Securities Dealers,
Inc. Automated Quotation ("NASDAQ") Stock Market Index (for United States
companies) and (ii) the cumulative total return on stocks included in the SNL
Thrift Index, published by SNL Securities, Charlottesville, Virginia,
commencing on December 30, 1993, the date the Common Stock was issued, through
June 30, 1996. The cumulative returns set forth below for each index assume
the reinvestment of dividends into additional shares of the same class of
equity securities at the frequency with which dividends were paid on such
securities during the applicable comparison period.
COMPARISON OF SEMI-ANNUAL CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, NASDAQ STOCK MARKET (U.S.) INDEX
AND SNL THRIFT INDEX(1)
12/31/93 06/30/94 12/31/94 06/30/95 12/31/95 06/30/96
-------- -------- -------- -------- -------- --------
Company Common Stock $100.00 $151.56 $137.50 $168.75 $193.75 $187.50
NASDAQ Total Return $100.00 $91.32 $97.75 $121.89 $138.22 $156.49
SNL Thrift Index $100.00 $107.15 $98.87 $127.13 $154.13 $160.88
- - ----------------------------
(1) Assumes $100.00 invested on December 30, 1993, and all dividends
reinvested through the end of the Company's fiscal year on June 30,
1996. The Company did not pay dividends during the period from
December 30, 1993 to June 30, 1996. The performance chart is based
upon closing prices on the trading day specified, with the exception
of the value of the Company's Common Stock on December 30, 1993 which
is based upon the initial offering price of the Company's Common Stock
of $8.00 per share.
The Performance Graph shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement with any
filing under the Securities Act or the Exchange Act, except to the extent the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under the Securities Act or the Exchange Act.
-15-
19
INDEBTEDNESS OF MANAGEMENT AND CERTAIN TRANSACTIONS
Current federal law requires that all loans or extensions of credit to
executive officers and directors must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with the general public and must not involve more than
the normal risk of repayment or present other unfavorable features. In
addition, loans made to a director or executive officer in excess of the
greater of $25,000 or 5% of the Bank's capital and surplus (up to a maximum of
$500,000) must be approved in advance by a majority of the disinterested
members of the Board of Directors of the Bank.
The Bank's policy provides that all loans or extensions of credit to
executive officers and directors are to be made in the ordinary course of
business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than the normal risk of collectibility
or present other unfavorable features. All loans since the enactment of
current laws were made by the Bank in the ordinary course of business and were
not made with favorable terms nor involved more than the normal risk of
collectibility or presented unfavorable features.
The following table summarizes loans made by the Bank on preferential
terms to executive officers, directors and their associates, prior to the
enactment of current laws, whose aggregate indebtedness to the Bank exceeded
$60,000 at any time since July 1, 1995. All loans or extensions of credit to
executive officers, directors and their associates were current as of June 30,
1996.
LARGEST AMOUNT
OUTSTANDING DURING
MATURITY THE YEAR ENDED BALANCE AT INTEREST
NAME DATE OF LOAN DATE JUNE 30, 1995 JUNE 30, 1995 RATE/TYPE
---- ------------ ---- ------------- ------------- ---------
Charles E. Rickheim . . 09/09/88 10/01/18 131,121 128,197 5.35%/Adj.
Director of the Mortgage
Company and
Bank
The Company and the Bank intend that all transactions in the future
between the Company and the Bank and executive officers, directors, holders of
10% or more of the shares of any class of common stock of the Company and
affiliates thereof, will contain terms no less favorable to the Company or the
Bank than could have been obtained by them in arms' length negotiations with
unaffiliated persons and will be approved by a majority of independent outside
directors of the Company or the Bank, as applicable, not having any interest in
the transaction.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of the shares of Common
Stock outstanding, to file reports of ownership and changes in ownership with
the SEC and the National Association of Securities Dealers, Inc. Officers,
directors and greater than ten percent shareholders are required by regulation
to furnish the Company with copies of all Section 16(a) forms they file. Based
upon review of the information provided to the Company, the Company believes
that during the fiscal year ended June 30, 1996, officers, directors and
greater than ten percent shareholders complied with all Section 16(a) filing
requirements.
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SHAREHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Any proposal which a shareholder wishes to have included in the proxy
materials of the Company relating to the third annual meeting of the
shareholders of the Company, which is scheduled to be held in October 1996,
must be received at the principal executive offices of the Company, 7401 West
Greenfield Avenue, West Allis, Wisconsin 53214, Attention: Peter A. Gilbert,
Corporate Secretary, no later than May 22, 1997. If such proposal is in
compliance with all of the requirements of Rule 14a-8 under the Exchange Act,
it will be included in the proxy statement and set forth on the form of proxy
issued for such annual meeting of shareholders. It is urged that any such
proposals be sent certified mail, return receipt requested.
Nothing in this section shall be deemed to require the Company to
include in its proxy statement and proxy relating to the 1996 Annual Meeting
any shareholder proposal which does not meet all of the requirements for
inclusion established by the SEC in effect at the time such proposal is
received.
Shareholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the Exchange Act may be
brought before an annual meeting pursuant to Article VII of the Company's
Articles of Incorporation. For business to be properly brought before an
annual meeting by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Company. To be timely, a
shareholder's notice must be delivered to or mailed by first class United
States mail, postage prepaid, to the principal executive offices of the Company
not later than the close of business on the tenth day following the day on
which notice of such annual meeting is first given to shareholders. A
shareholder's notice must set forth certain information in accordance with
Article VII of the Company's Articles of Incorporation. The advance notice
must include the shareholder's name and address, as they appear on the
Company's record of shareholders, the class and number of shares of the
Company's Common Stock beneficially owned by such shareholder, a brief
description of the proposed business, the reason for considering such business
at the annual meeting and any material interest of the shareholder in the
proposed business. In the case of nominations for elections to the Board of
Directors, certain information regarding the nominee must be provided.
OTHER MATTERS WHICH MAY PROPERLY
COME BEFORE THE ANNUAL MEETING
The Board of Directors knows of no business which will be presented
for consideration at the Annual Meeting other than as stated in the Notice of
Annual Meeting of Shareholders. If, however, other matters are properly
brought before the Annual Meeting or any adjournments or postponements thereof,
it is the intention of the persons named in the accompanying proxy to vote the
shares represented thereby on such matters in accordance with their best
judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
West Allis, Wisconsin Peter A. Gilbert
September 18, 1996 Executive Vice President and Corporate Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE- PAID ENVELOPE
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