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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
Heritage Financial Services, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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HERITAGE FINANCIAL SERVICES, INC.
25 Jefferson Street
Clarksville, Tennessee 37040
March 29, 1999
Dear Fellow Shareholder:
On behalf of the Board of Directors, we cordially invite you to
attend the 1999 Annual Meeting of shareholders of Heritage Financial Services,
Inc. The Annual Meeting will be held beginning at 1:00 p.m., local time, on
Tuesday, April 20, 1999, at Heritage Bank, 25 Jefferson Street, Clarksville,
Tennessee 37040. The formal notice of the Annual Meeting appears on the next
page.
Enclosed is our Proxy Statement for the 1999 Annual Meeting that
discusses the proposals for which we seek your support.
The enclosed Notice and Proxy Statement contain detailed information
about the business to come before the meeting. We urge you to review the Proxy
Statement and each of the proposals contained therein carefully. Regardless of
the number of shares you own, it is important that your shares be represented
and voted at the meeting. PLEASE TAKE A MOMENT NOW TO SIGN, DATE AND MAIL THE
ENCLOSED PROXY IN THE POSTAGE PREPAID ENVELOPE. Your Board of Directors
recommends a vote FOR each proposal.
We are gratified by our shareholders' continued interest in Heritage
Financial and pleased that in the past so many of you have voted your shares. We
hope that you will continue to do so and again urge you to return your proxy as
soon as possible.
Sincerely,
James G. Holleman Earl O. Bradley, III
Chairman of the Board President and Chief Executive Officer
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HERITAGE FINANCIAL SERVICES, INC.
25 Jefferson Street
Clarksville, Tennessee 37040
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, APRIL 20, 1999
Notice is hereby given that the annual meeting of shareholders of
Heritage Financial Services, Inc. (the "Company"), will be held beginning at
1:00 p.m. local time, on Tuesday, April 20, 1999, at Heritage Bank, 25 Jefferson
Street, Clarksville, Tennessee:
I. To elect four directors whose terms expire in 1999, to serve
three year terms until the 2002 annual meeting of shareholders
or until their successors are elected and qualified.
II. To ratify the appointment of Heathcott & Mullaly, P.C.,
Brentwood, Tennessee as Independent Public Accountants of the
Company and its affiliates for the fiscal year ending
December 31, 1999.
III. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Shareholders of record at the close of business on March 5, 1999, are
entitled to notice of and to vote at the Annual Meeting
All shareholders are cordially invited to attend the meeting in
person. Regardless of whether you plan to attend the meeting, please sign and
date the enclosed proxy and return it in the envelope provided as promptly as
possible. A proxy may be revoked at any time before it is voted at the meeting.
By Order of the Board of Directors
John T. Halliburton, Secretary
Clarksville, Tennessee
March 29, 1998
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HERITAGE FINANCIAL SERVICES, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 20, 1999
This proxy statement (the "Proxy Statement") is furnished to the
shareholders of Heritage Financial Services, Inc. (the "Company") in connection
with the solicitation of proxies on behalf of the Board of Directors of the
Company (the "Board of Directors" or the "Board"), for use at the annual meeting
of shareholders (the "Annual Meeting") to be held at 1:00 p.m., local time, on
Tuesday, April 20, 1999, at Heritage Bank, 25 Jefferson Street, Clarksville,
Tennessee, and any adjournments or postponements thereof.
The mailing address of the Company's principal executive offices are
located at 25 Jefferson Street, Clarksville, Tennessee and its telephone number
is (931)553-0500.
This Proxy Statement, the attached proxy and the Notice of Annual
Meeting were mailed to all shareholders entitled to vote at the Annual Meeting
on or about March 29, 1999. The Company's annual report to shareholders for the
fiscal year ended December 31, 1998 accompanies this Proxy Statement.
The purposes of the Annual Meeting are to act upon the following three
Proposals:
I. To elect four directors whose terms expire in 1999, to serve
three year terms until the 2002 annual meeting or until their
successors are elected and qualified.
II. To ratify the appointment of Heathcott & Mullaly, P.C.,
Brentwood, Tennessee as Independent Public Accountants of the
Company and its affiliates for the fiscal year ending
December 31, 1999.
III. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Friday, March
5, 1999, as the record date (the "Record Date") for the Annual Meeting. Only
shareholders of record at the close of business on that date will be entitled to
notice of, and to vote at, the Annual Meeting. The total number of shares of
Common Stock outstanding and entitled to vote on the Record Date was 579,645
shares. The Company has no other outstanding class of securities.
PROXY PROCEDURE
The Board of Directors solicits proxies so that each shareholder has
the opportunity to vote on the Proposals. When a proxy is returned properly
signed and dated by a shareholder, the shares represented thereby will be voted
in accordance with the instructions on the proxy. A shareholder may revoke his
or her proxy at any time before it is voted by attending the Annual Meeting and
voting in person, or by delivering to the Company's Corporate Secretary at the
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Company's principal executive offices referred to above a written notice of
revocation or a duly executed proxy bearing a date later than that of the
previously submitted proxy.
If a shareholder returns a properly signed and dated proxy but does
not mark the boxes located on the proxy, the shares represented by that proxy
will be voted FOR each of the Proposals. Otherwise, the signed proxy will be
voted as indicated on the proxy. The proxy also gives the individuals named as
proxies discretionary authority to vote the shares represented on any other
matter that is properly presented for action at the Annual Meeting. If a
shareholder neither returns a signed proxy nor attends the Annual Meeting and
votes in person, his or her shares will not be voted.
VOTING PROCEDURES
A majority of the votes entitled to be cast at the Annual Meeting
constitutes a quorum. A share, once represented for any purpose at the Annual
Meeting, is deemed present for purposes of determining a quorum for the
remainder of the Annual Meeting and for any adjournment of the Annual Meeting,
unless a new record date is set for the adjourned meeting. This is true even if
the holder of the share abstains from voting with respect to any matter brought
before the Annual Meeting. Shareholders will be entitled to one vote for each
share held, which may be given in person or by proxy authorized in writing.
"Abstentions" are counted only for purposes of determining whether a quorum is
present at the meeting.
With respect to Proposal III and to any other matter to properly come
before the Annual Meeting, such Proposal or other matters will be approved if
the votes cast favoring the Proposal or other matter exceed the votes cast
opposing the Proposal or other matter, unless the Company's Charter or Tennessee
law require a greater number of affirmative votes.
COST OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company,
including expenses incurred in connection with preparing and mailing the Proxy
Statement. The initial solicitation will be by mail.
PROPOSAL I
ELECTION OF DIRECTORS
The Company's Charter and ByLaws provide that the Board of Directors
shall consist of a minimum of three (3) and a maximum of twelve (12) directors.
The Board currently consists of twelve directors, which also serve as directors
of Heritage Bank. The directors are elected by the shareholders for staggered
three year terms. Directors whose term of office expires at the 1998 Annual
Meeting are Earl O. Bradley, III, W. Lawson Mabry, Dr. Ted R. McCurdy and James
W. Russell. Each of these directors has been nominated for terms expiring at the
2002 annual meeting, or until their successor is duly elected and qualified.
Unless otherwise instructed on the proxy, the proxy holders will vote
the proxies received by them FOR the election of the four nominees named above.
If, for any reason, one or more of the nominees named above should not be
available as a candidate for director, an event that the
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Board of Directors does not anticipate, the proxy holders will vote for such
other candidate or candidates as may be nominated by the Board of Directors and
discretionary authority to do so is included in the proxy.
The Board of Directors recommends a vote FOR the election of all the
nominees.
The following table provides certain information about the nominees
and the other present directors of the Company. The information in the table has
been furnished to the Company by the individuals listed therein.
Positions Held With Director
Name Age (1) the Company/Bank Since (2)
---- --- ---------------- -----
NOMINEES FOR TERMS TO EXPIRE AT 2002 ANNUAL MEETING
Earl O. Bradley, III 43 Director, President and 1989
Chief Executive Officer
of Company and Bank
W. Lawson Mabry 43 Director 1989
Dr. Ted R. McCurdy 53 Director 1996
James W. Russell 75 Director 1989
CONTINUING DIRECTORS UNTIL 2000 ANNUAL MEETING
David R. Farris 61 Director 1994
George R. Fleming, Sr. 76 Director 1989
John T. Halliburton 51 Director, Executive Vice 1989
President and Secretary
of Company and Bank
Ruth C. Hutton 75 Director 1989
CONTINUING DIRECTORS UNTIL 2001 ANNUAL MEETING
William G. Beach 42 Director 1996
Jeffrey V. Bibb 44 Director 1989
James G. Holleman 67 Director, Chairman of 1989
Company and Bank
James E. Thomas, Sr. 65 Director 1989
(1) As of the Record Date.
(2) Director of the Company or, prior to formation of the Company, the Bank.
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WILLIAM G. BEACH is the President of Beach Oil Company, an Amoco Oil
distributor and owner/operator of convenience markets, and is a director of
Tennessee Oil Marketers Association. Mr. Beach serves on the boards of the
Clarksville Academy and the Clarksville YMCA. He is a 1978 graduate of Austin
Peay State University.
JEFFREY V. BIBB is a partner in the firm of Bibb, Lott and Fryer
Marketing/Advertising. Mr. Bibb is a 1976 graduate of Austin Peay State
University with a bachelor's degree in urban affairs and regional development.
Mr. Bibb serves as co-chairman of the Clarksville Downtown Redevelopment Task
Force, and served as the 1998 chairman of the Clarksville Riverfront Project
that was nationally recognized by receipt of the Clearwater Award. He serves on
the Austin Peay State University athletic hall of fame selection committee, as
chairman of administrative council of Hilldale United Methodist Church, and is a
graduate of Leadership Clarksville
EARL O. BRADLEY, III has served as President and Chief Executive
Officer of the Company and the Bank since their formation. Mr. Bradley is a
certified public accountant and is a graduate of Austin Peay State University.
He is a graduate of the University of Wisconsin School for Bank Administration
and the Tennessee Commercial Lending School at Vanderbilt University. Mr.
Bradley serves on the Clarksville\ Montgomery County Industrial Board and the
ASPIRE 2000 committee.
DAVID R. FARRIS is a marketing consultant. Mr. Farris served as
Executive Vice President and Corporate Officer of American Standard, Inc. for 28
years. He is a graduate of the University of Wisconsin with a bachelor's degree
in engineering and did post graduate work at the University of Missouri. Mr.
Farris serves on three boards including the Industrial Development Board of
Montgomery County, the Clarksville\Montgomery County Public Library, and the
Montgomery County United Way. He is a member of the board of directors of Rotary
International and is a graduate of Leadership Clarksville.
GEORGE R. FLEMING, SR. practices law in the Clarksville community.
He received his Jurisprudence Degree from the University of Tennessee College of
Law.
JOHN T. HALLIBURTON has served as Executive Vice President and
Secretary of the Company and the Bank since their formation. He is also the
senior credit officer of the Bank. He is a graduate of Austin Peay State
University with a bachelor's degree in business administration and is a graduate
of the Tennessee Commercial Lending School at Vanderbilt University. Mr.
Halliburton serves on the executive committee and board of directors of the
Clarksville Area Chamber of Commerce.
JAMES G. HOLLEMAN has served as Chairman of the Board of the Company
and the Bank since their formation. He is engaged in the real estate business
and is President of Coldwell Banker-Conroy, Marable & Holleman Real Estate, Inc.
and Chairman of the Board of CM&H Commercial Properties, Inc. He is a graduate
of Vanderbilt University with a bachelor's degree in business administration.
Mr. Holleman serves on the board of trustees of Baptist Hospital in Nashville.
He is a former city councilman, past president of Clarksville Area Chamber of
Commerce, and past vice president of Leadership Clarksville.
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RUTH C. HUTTON served as the manager of the Clarksville Credit Bureau
prior to her retirement. She is a graduate of the Garrett School of Business and
the University of North Carolina Management Institute. Ms. Hutton has served on
the Clarksville Regional Planning Commission.
W. LAWSON MABRY is a real estate broker with Coldwell Banker-Conroy,
Marable and Holleman Real Estate, Inc. and is actively involved in the ownership
and development of real estate. He is a graduate of Austin Peay State
University. Mr. Mabry serves as a trustee and treasurer of the
Clarksville\Montgomery County Library.
DR. TED R. MCCURDY is an oral and maxillofacial surgeon in private
practice with McCurdy & Ellis. He is a graduate of Mercer University in Macon,
Georgia, attended the University of Tennessee Medical School in Memphis, and
completed his intern/residency at the University of Tennessee Memorial Research
Hospital in Knoxville. Dr. McCurdy is a member of the American Association and
Tennessee Society of Oral and Maxillofacial Surgeons. He serves as chairman for
the Economic Development Council of Clarksville\ Montgomery County and the
Clarksville Area Chamber of Commerce, and is chairman elect of Citizens for Fort
Campbell.
JAMES W. RUSSELL, SR. serves as Chairman of Russell, Russell and
Waddle, Inc., a firm engaged in real estate development and contracting in the
Clarksville area.
JAMES E. THOMAS, SR. is the owner and manager of real estate
investment properties. He is a graduate of Vanderbilt University with a
bachelor's degree in business administration.
STOCK OWNERSHIP OF DIRECTORS, OFFICERS AND PRINCIPAL SHAREHOLDERS
The following table sets forth information as of the Record Date as
to the shares of Common Stock beneficially owned by directors and executive
officers individually and by all executive officers and directors as a group.
SHARES OF
COMMON STOCK
BENEFICIALLY PERCENT OF
NAME TITLE OWNED (1) CLASS
---- ----- --------- -----
William G. Beach (2) (3) Director 2,085 0.34%
Jeffrey V. Bibb (3) (5) Director 10,322 1.76%
Earl O. Bradley, III (4) (6) President and Chief 48,470 8.36%
Executive Officer of
Company and Bank
David R. Farris (2) (3) (7) Director 3,642 0.61%
George R. Fleming, Sr. (2) (3) (8) Director 19,975 3.43%
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SHARES OF
COMMON STOCK
BENEFICIALLY PERCENT OF
NAME TITLE OWNED (1) CLASS
---- ----- --------- -----
John T. Halliburton (4) (9) Executive Vice President 42,726 7.35%
and Secretary of Company
and Bank
James G. Holleman (2) (3) (10) Chairman of the Board of 15,168 2.60%
Company and Bank
Ruth C. Hutton (2) (3) Director 1,259 0.20%
W. Lawson Mabry (2) (3) (11) Director 15,265 2.62%
Dr. Ted R. McCurdy (2) (3) Director 1,601 0.33%
James W. Russell (2) (3) (12) Director 20,975 3.60%
James E. Thomas (2) (3) (13) Director 18,784 3.22%
Directors and Executive Officers as a group 210,272 36.11%
(1) Includes shares as to which such person, directly or indirectly, through any
contract, arrangement, understanding, relationship, or otherwise has or shares
voting power and/or investment power as these terms are defined in Rule 13d-3(a)
of the Securities Exchange Act of 1934.
(2) Includes 385, 554, 545, 675, 539, 384, 516, 513 and 115 shares beneficially
owned by Messrs. Beach, Farris, Fleming, Holleman, Mabry, McCurdy, Russell,
Thomas and Ms. Hutton, respectively, under the Directors' Unfunded Deferred
Compensation Plan.
(3) Includes 100 shares subject to options granted to each non-employee director
(excludes Messrs. Bradley and Halliburton) which are within 60 days as of the
Record Date of becoming exercisable under the Outside Directors' Stock Option
Plan.
(4) Includes 2,513 and 2,121 shares beneficially owned by Messrs. Bradley and
Halliburton, respectively, under the Heritage Bank Employee Stock Ownership Plan
& Trust (ESOP), and 150 and 1,500 shares subject to options granted to Messrs.
Bradley and Halliburton, respectively, under the 1989 Employee Stock Option
Plan, which are currently exercisable. The Company's 1998 ESOP contribution has
not been allocated.
(5) Includes 209 shares held in custodian accounts for minor children over which
Mr. Bibb has joint voting and investment power, 9,700 shares held in Mr. Bibb's
individual retirement accounts, and 313 shares jointly owned with his wife.
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(6) Includes 871 shares held in custodian accounts for minor children over which
Mr. Bradley has sole voting and investment power, and 1,022 shares held in Mr.
Bradley's individual retirement account.
(7) Includes 1,494 shares held in Mr. Farris' individual retirement account, and
1,494 shares held in his wife's individual retirement account to which Mr.
Farris disclaims beneficial ownership.
(8) Includes 6,269 shares held by Fleming and Fleming Rental, a partnership of
which Mr. Fleming is a partner.
(9) Includes 4,406 shares held in Mr. Halliburton's individual retirement
account, 34,177 shares jointly owned with his wife, and 522 shares held in the
estate of Virginia Halliburton of which Mr. Halliburton is co-executor.
(10) Includes 1,055 shares owned by Mr. Holleman's wife.
(11) Includes 10,373 shares held in Mr. Mabry's individual retirement accounts.
(12) Includes 417 shares held in Mr. Russell's individual retirement account,
417 shares held in his wife's individual retirement account as to which Mr.
Russell disclaims beneficial ownership, and 19,525 shares held in the James W.
and Vista Russell Revocable Living Trust.
(13) Includes 5,642 shares held in the 1993 Mary H. Thomas (wife of Mr. Thomas)
Revocable Trust as to which Mr. Thomas disclaims beneficial ownership, and
12,529 shares held in the James Eldon Thomas Family Family Partnership, L.P.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of the Company met ten times during 1998. The Board of the
Bank meets monthly and on a called basis. During the fiscal year ended December
31, 1998, the Board of the Bank met fourteen times. Each director attended at
least 75% of all meetings held by the Boards of the Company and Bank and the
committees on which he or she served.
The Bank has the following committees:
The Executive Committee generally meets weekly and acts upon Bank
matters between Board meetings. The Executive Committee consists of three
permanent members - the Chairman of the Board, the President and Chief Executive
Officer, and the Executive Vice President. The remaining directors serve on the
Executive Committee on a rotational basis. This Committee met 34 times in 1998.
The Audit Committee consists of Messrs. Fleming, McCurdy, Mabry and
Ms. Hutton. None of the members of the Audit Committee are employees of either
the Company or Bank. This Committee generally reviews internal and external
audit activities, compliance activities, and the adequacy of the systems of
internal control over operations and financial reporting, and advises the Board
and management of broad issues related to these areas. Additionally, this
Committee is responsible for oversight of the Bank's Year 2000 plan to ensure
that its systems are able to properly deal with Year 2000 issues. This Committee
met seven times during 1998.
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The Human Resources Committee consists of Messrs. Farris, Thomas,
Beach, Bibb and ex-officio Holleman. None of the members of the Human Resources
Committee are employees of the Company or Bank. Messrs. Bradley and Halliburton
also serve as ex-officio members of the Committee on matters not involving their
personal compensation. This Committee establishes the compensation of the
President and Chief Executive Officer and Executive Vice President, approves the
compensation of senior officers, and various compensation and benefits to be
paid to employees of the Bank (including grants of stock options). This
Committee met three times during 1998.
The Facilities Committee consists of Messrs. Bibb, Farris, Mabry,
Russell, and Thomas. Also, Messrs. Holleman, Bradley and Halliburton serve as
ex-officio members. This Committee is responsible for planning future needs
related to facilities including site selection and building and space
requirements. Due to the construction of the new main office building, this
Committee met in conjunction with the monthly Board of Directors meetings.
COMPENSATION OF DIRECTORS
During 1998, the Chairman of the Board and Committee Chairmen
received annual retainers of $3,000 and $2,000, respectively. All other
non-employee directors receive an annual retainer of $1,800. Non-employee
directors also receive $200 for attendance at each Board Meeting and $100 for
attendance at each Committee Meeting. In addition, non-employee directors
receive an incentive fee based upon the Company achieving certain net income
goals. Each non-employee director received an incentive fee of $2,100 for the
1998 year.
DIRECTORS' UNFUNDED DEFERRED COMPENSATION PLAN
The Directors' Unfunded Deferred Compensation Plan provides incentive
to the directors who have contributed to the success of the Company, and which
are expected to continue to contribute to such success in the future. The plan
is administrated by the Board and acts through a majority of its members.
Non-employee directors are eligible to participate in the plan and may elect to
defer all or part of their director's compensation to the plan. The plan
purchases the Company's Common Stock for the benefit of those directors electing
to participate in the plan. Directors elected to defer $73,200 and $71,950 in
1998 and 1997, respectively, of compensation into the plan. Common Stock
purchased for the benefit of the participating directors was 946 shares and
1,348 shares for the 1998 and 1997 plan years, respectively.
PROPOSAL II
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors proposes for the ratification of the
shareholders at the Annual Meeting the appointment of Heathcott and Mullaly,
P.C., Brentwood, Tennessee, certified public accountants, as Independent Public
Accountants for the Company and its affiliates for the fiscal year ending
December 31, 1999. Heathcott and Mullaly, P.C. has served as Independent Public
Accountants for the Company or Bank since 1990. In the event Heathcott and
Mullaly, P.C. is not ratified by the Shareholders, the Board of Directors will
consider appointment of other independent public accountants for the fiscal year
ending December 31, 1999.
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The Board of Directors of the Company recommends a vote FOR the
ratification of Heathcott and Mullaly, P.C. as Independent Public Accountants
for the Company.
PROPOSAL III
SHAREHOLDERS PROPOSALS AND OTHER MATTERS
Management of the Company is not aware of any other matters to be
brought before the Annual Meeting. However, if any other matters are properly
brought before the Annual Meeting, the persons named in the enclosed form of
proxy will have discretionary authority to vote all proxies with respect to such
matters in accordance with their judgment.
Shareholders intending to submit proposals for presentation at the
next Annual Meeting of Shareholders of the Company and inclusion in the proxy
statement and form of proxy for such Meeting should forward such proposals to
John T. Halliburton, Heritage Financial Services, Inc., 25 Jefferson Street,
Clarksville, Tennessee 37040. Proposals must be in writing and must be received
by the Company prior to November 26, 1999. Proposals should be sent to the
Company by certified mail, return receipt requested.
EXECUTIVE COMPENSATION
The executive officers of the Company receive cash compensation from
the Bank in connection with their positions as executive officers and directors
of the Bank and the Company. No executive officer ceased to serve as such at any
time during the fiscal year ended December 31, 1998. The following table sets
forth the compensation for services in all capacities to the Company for the
fiscal years ending December 31, 1998, 1997 and 1996, of Earl O. Bradley, III,
the Company's President and Chief Executive Officer, and John T. Halliburton,
the Company's Executive Vice President.
SUMMARY COMPENSATION TABLE
NAME AND PRINCIPAL OFFICE YEAR SALARY BONUS OTHER
- ------------------------- ---- -------- ------- -------
Earl O. Bradley, III 1998 $154,000 $83,160 $21,985
President and Chief 1997 144,000 34,582 21,666
Executive Officer 1996 125,000 42,792 21,257
John T. Halliburton 1998 130,500 70,470 21,088
Executive Vice President 1997 122,000 36,801 21,137
and Secretary 1996 106,250 26,829 19,508
(1) Bonus consists of amounts payable with respect to the subject year.
STOCK COMPENSATION PLANS
Employee Stock Option Plans. The Company has two employee stock
option plans (the 1989 plan and the 1998 plan) to advance the interests of the
Bank and its shareholders by attracting and retaining in the employment of the
Company key professional and management employees, by providing such employees
with the incentive for outstanding performance inherent in stock options, and by
increasing their proprietary interest in the Company through stock ownership.
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The plans are administered, interpreted and applied by the Human
Resources Committee of the Board, none of which are eligible to receive options.
The Committee is authorized to select key employees (including employee
directors who are salaried employees) of the Company to whom options are to be
granted under the plan; to determine the number of shares subject to each
option; to fix the period or periods during which the option may be exercised
(not to exceed ten years); and to fix the prices at which shares subject to
options may be purchased. The plans provide for these key employees to purchase
shares of the Company's common stock at the fair market value at the date of the
grant. The options granted under the plans become exercisable over a period not
to exceed ten years.
The 1989 plan provides for a total of 150,000 options all of which
have been granted, 88,150 shares have been exercised, and 2,850 shares are
currently exercisable. The 1998 plan also provides for a total of 150,000
options which may be granted through April 20, 2008 (termination date of the
plan). As of December 31, 1998, 19,619 shares have been granted under the plan
and none are currently exercisable.
The right to exercise an option generally expires three months after
employment is terminated. In the event of any change in the outstanding shares
of stock by reason of stock dividend, split or combination, recapitalization or
reclassification, or a reorganization, merger, etc., the number and class of
shares then subject to options shall be appropriately adjusted by the Committee
to reflect such change.
The following table provides information with respect to executive
officers concerning the exercise of options during 1998 and unexercised options
held as of December 31, 1998.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
Value of
Unexercised
Unexercised in-the-Money
Options Options
at Fiscal at Fiscal
Acquired Year End Year End(2)
on Value Exercisable/ Exercisable/
Name Exercise Realized(1) Unexercisable Unexercisable
- ---- -------- ----------- ------------- ---------------
Earl O. Bradley, III 350 $ 29,750 150/17,887 $ 12,750/815,661
John T. Halliburton 1,500 127,500 1,500/13,295 127,500/616,685
(1) Represents the difference between the last trade price for the Common
Stock on the date of exercise and the option price paid upon exercise.
(2) Last trade price of underlying securities at December 31, 1998 ($95.00)
less the exercise price.
The Company granted 14,000, 2,347 and 1,540 stock options to Mr.
Bradley during the years 1998, 1997 and 1996, respectively. In addition, the
Company granted 10,000, 1,995 and 1,300 stock options to Mr. Halliburton during
the years 1998, 1997 and 1996, respectively.
Directors' Stock Option Plan. At the 1998 annual shareholders
meeting, the shareholders of the Company approved the Outside Directors' Stock
Option Plan. This stock option plan
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provides for non-employee directors to purchase shares of the Company's common
stock at the fair value at the date of the grant. The options granted under the
plan become exercisable over a period not to exceed ten years. The plan provides
for a total 40,000 options, which may be granted through April 20, 2008
(termination date of the plan). Each non-employee director is to be
automatically granted 500 shares annually for the years 1998 through 2002. Such
options vest at the rate of 20% annually, and as of December 31, 1998, 5,000
shares have been granted under the plan (500 option shares at an exercise price
of $55.00 per share) and none are currently exercisable.
EMPLOYEE STOCK OWNERSHIP PLAN
The Heritage Bank Employee Stock Ownership Plan & Trust (ESOP) is an
employee stock ownership plan which is designed to invest primarily in the
Company's Common Stock. In general, all employees of the Company and the Bank
are covered under this plan and employees are fully vested in their benefits
after five years of participation in the plan. Company contributions are
determined by the Board of Directors each year and are allocated among
participants on the basis of their total annual compensation. Operating expense
included contributions of $181,250 (1998), $143,750 (1997), and $131,250 (1996)
to the ESOP. The amount contributed in 1998 for the 1997 plan year was $9,885
and $9,642 for Messrs. Bradley and Halliburton, respectively. In 1998, the ESOP
purchased 3,150 shares of the Company's Common Stock at an average cost of
$82.00 per share. The ESOP owned 25,162 shares (4.33% of outstanding shares) of
the Company's Common Stock as of the Record Date. The average cost of the shares
of the Common Stock held by the ESOP at year-end 1998 was approximately $32.70
per share.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Certain of the Bank's officers and directors are at present, as in
the past, customers of the Bank, and are directors or officers of corporations,
or members of partnerships, which are customers of the Bank. As such customers,
they had transactions in the ordinary course of business with the Bank,
including borrowings, all of which are 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 normal
risk of collectability or present any other unfavorable features.
Jeffrey V. Bibb is a partner in the firm of Bibb, Lott and Fryer
Marketing/Advertising. During 1998, the Bank paid $103,214 to the firm for
services rendered.
William G. Beach is the President of Beach Oil Company. During 1998,
the Bank paid Beach Oil Company $24,000 to lease automated teller machine space
at various convenience markets, and $4,134 for fuel costs related to the
construction of the new main office building.
Messrs. Bradley, Mabry, Halliburton, Russell, Holleman, Farris,
Thomas and Fleming are partners in Riverside Partners. During 1998, the Bank and
its subsidiary (Advance Credit, Inc.) leased office space from Riverside
Partners in the amount of $24,933.
15
INDEBTEDNESS OF RELATED PARTIES
Certain directors and executive officers of the Company, businesses
with which they are associated, and members of their immediate families are
customers of the Bank and had transactions with the Bank in the ordinary course
of its business during the Bank's fiscal years ended December 31, 1998 and 1997.
As of December 31, 1998, the aggregate principal amount of indebtedness
(including unfunded commitments) owed to the Bank by directors and executive
officers and these related parties was $5,689,000. In the opinion of the Board
of Directors, such transactions were made in the ordinary course of business,
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and do not involve more than the normal risk of collectibility or
present other unfavorable features.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers, and any person beneficially owning more than ten percent of
the Company's Common Stock to file reports of securities ownership and changes
in that ownership with the Commission. Officers, directors and greater than ten
percent shareholders also are required by rules promulgated by the Commission to
furnish the Company with copies of all Section 16(a) forms they file.
Based upon a review of the copies of such forms furnished to the
Company for fiscal 1998, the Company believes that during the fiscal year ended
December 31, 1998, its executive officers, directors and greater than ten
percent beneficial owners complied with all applicable Section 16(a) filing
requirements.
AVAILABILITY OF ANNUAL REPORT ON FORM 10 KSB
The annual report to shareholders containing financial statements for
the Company's 1998 fiscal year accompanies this Proxy Statement. However, the
annual report does not form any part of the material for the solicitation of
proxies.
UPON THE WRITTEN REQUEST OF ANY RECORD HOLDER OR BENEFICIAL OWNER OF
THE SHARES ENTITLED TO VOTE AT THE ANNUAL MEETING, THE COMPANY, WITHOUT CHARGE,
WILL PROVIDE A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
DECEMBER 31, 1998 WHICH WILL BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON TUESDAY, MARCH 30, 1999. REQUESTS SHOULD BE MAILED TO EARL O.
BRADLEY, III, PRESIDENT AND CHIEF EXECUTIVE OFFICER, HERITAGE FINANCIAL
SERVICES, INC., 25 JEFFERSON STREET, CLARKSVILLE, TENNESSEE 37040.
16
Appendix A
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
HERITAGE FINANCIAL SERVICES, INC.
25 JEFFERSON STREET
CLARKSVILLE, TENNESSEE 37040
The undersigned, having received the Notice of the Annual Meeting of
Shareholders dated April 20, 1999, hereby appoints David Smithfield and Shan
Smith, either of whom may act as proxies, with full power of substitution, proxy
and attorneys-in-fact of the undersigned to vote all the shares of Common Stock
of Heritage Financial Services, Inc. which the undersigned would be entitled to
vote at the Annual Meeting of Shareholders to be held at Heritage Bank, 25
Jefferson Street, Clarksville, Tennessee on April 20, 1999, at 1:00 p.m. and any
adjournments thereof, and the undersigned instructs said proxies to vote upon
the following matters:
Proposal I: To elect to the Board of Directors of the Company, the four (4)
directors named below.
___ FOR ALL NOMINEES LISTED BELOW ___ WITHHOLD AUTHORITY TO VOTE FOR ALL
(Except as marked to the contrary below) NOMINEES LISTED BELOW
INSTRUCTION: To withhold authority for any individual nominee, strike a line
through the nominee's name in the list below.
EARL O. BRADLEY, III W. LAWSON MABRY
JAMES W. RUSSELL DR. TED R. MCCURDY
Proposal II: To ratify the appointment of Heathcott & Mullaly, P.C.,
Brentwood, Tennessee, as Independent Public Accountants of the
Company and its affiliates for the fiscal year ending December
31, 1999.
___ FOR __ AGAINST __ ABSTAIN
Proposal III: To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Any proxy heretofore given for said meeting is hereby revoked.
IF NO INSTRUCTIONS ARE GIVEN ABOVE, THE UNDERSIGNED SHAREHOLDER HEREBY
AUTHORIZES THE PROXIES NAMED HEREIN TO VOTE FOR PROPOSALS I AND II.
___________________ _____________ ________________ ______________
Signature Date Signature Date
(See special instructions below)
PLEASE DATE AND SIGN THE ABOVE EXACTLY AS YOUR NAME OR NAMES
APPEAR ON THE STOCK CERTIFICATES. IF SHARES ARE HELD BY TWO OR
MORE PERSONS, ALL MUST SIGN. WHEN SIGNING AS ATTORNEY-IN-FACT,
EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN OR OTHER PERSON
ACTING IN A REPRESENTATIVE OR FIDUCIARY CAPACITY, PLEASE GIVE
FULL TITLE AS SUCH. IF THE SIGNER IS SIGNING FOR A CORPORATION,
PLEASE SIGN IN FULL THE CORPORATE NAME BY A DULY AUTHORIZED
OFFICER WITH FULL TITLE.