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MidSouth Bancorp DEF 14A 2008
MIDSOUTH
BANCORP, INC.
102
Versailles Boulevard
Versailles
Centre
Lafayette,
Louisiana 70501
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
Lafayette,
Louisiana
April
2, 2008
We will
hold our annual shareholders meeting on Wednesday, May 28, 2008, at 2:00 p.m.,
local time, at our corporate offices, 102 Versailles Blvd., Lafayette, Louisiana
70501, where we will vote upon:
1. The
election of directors.
2. Such
other matters as may properly come before the meeting or any
adjournments.
If you
are listed on our books as the holder of record of our common stock on March
31, 2008, you are
entitled to notice of and to vote at the meeting.
Your vote
is important regardless of the number of shares you own. WHETHER OR
NOT YOU PLAN TO COME TO THE MEETING, PLEASE MARK, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING
ENVELOPE. YOUR PROXY MAY BE REVOKED BY NOTICE TO OUR SECRETARY AT ANY
TIME BEFORE IT IS VOTED.>
BY ORDER
OF THE BOARD
OF
DIRECTORS
Karen L.
Hail
Secretary
-1-
MIDSOUTH
BANCORP, INC.
102
Versailles Boulevard
Versailles
Centre
Lafayette,
Louisiana 70501
PROXY
STATEMENT
This
Proxy Statement is being sent to our stockholders to solicit on behalf of our
Board proxies for use at our annual shareholders meeting to be held on
Wednesday, May 28, 2008, at the time and place shown in the accompanying notice
and at any adjournments thereof. This Statement is first being mailed
to shareholders on or about April 23, 2008.
Only
holders of our common stock ("stock") on our books at the close of business on
March 31, 2008, are entitled to notice of and to vote at the
Meeting. On that date we had outstanding 6,762,531 shares of stock,
each of which is entitled to one vote.
The
presence, in person or by proxy, of holders of a majority of our Stock is needed
to make up a quorum; if a quorum is present, directors are elected by
plurality. With respect to any other proposal, however, if the Board
has recommended it by a majority of our Continuing Directors, as defined in our
Articles of Incorporation, then, generally, the vote of a majority of the votes
cast is required to approve it, and if it is not so recommended, then the vote
of 80% of the Total Voting Power, as defined in the Articles, is required to
approve it. The Continuing Directors will appoint the Judge(s) of
Election, and all questions as to voter qualification, proxy validity and
accepting or rejecting votes will be decided by the Judge(s).
Abstentions
or broker non-votes will not have any effect on the election of
directors. On any other proposal, abstentions and broker non-votes
will be counted as votes not cast and will have no effect on any proposal that
needs a majority of votes cast to approve it and will have the effect of a vote
against any proposal that needs the vote of a percentage of the Total Voting
Power.
All
proxies received in the enclosed form will be voted as you specify and, unless
you specify to the contrary, will be voted for the election of the persons named
herein. We do not know of anything else to be presented at the
Meeting other than the election, but if anything else does come up the persons
named in the enclosed proxy will vote the shares covered by the proxy as
determined by the Board of Directors.
A proxy
may be revoked by you at any time before its exercise by filing with our
Secretary a written revocation or a duly executed proxy with a later date. If
you vote in person in a manner inconsistent with a proxy previously filed by
you, you will be deemed to have revoked the proxy as to the matters you voted on
in person.
The cost
of soliciting proxies will be borne by us. In addition to the mail,
proxies may be solicited by personal interview, telephone, telegraph, facsimile,
internet and e-mail. Banks, brokerage houses and other nominees or
fiduciaries may be asked to forward these materials to their principals and to
get authority to execute proxies, and we will, upon request, reimburse them for
their expenses in so acting. -2-
ELECTION
OF DIRECTORS
Our
Articles provide for three classes of directors, with one class to be elected at
each annual meeting for a three-year term. At the Meeting, Class III
Directors will be elected to serve until the 2011 annual meeting.
Unless
you withhold authority, the persons named in the enclosed proxy will vote the
shares covered by the proxies received by them for the election of the four
Class III director nominees named below. If for some
reason we do not anticipate one or more nominees cannot be a
candidate at the Meeting, the shares will be voted in favor of such other
persons as the Board chooses. Directors will be elected by plurality
vote.
Other
than the Board, only shareholders who have complied with the procedures of
Article IV (H) of our Articles may nominate a person for election. To
do so, you must have given us written notice by December 27, 2007, of the
following:
(1) as to
each person whom you propose to nominate:
(a) his
or her name, age, business address, residence address, principal occupation or
employment,
(b) the
number of shares of our stock of which the person is the beneficial owner
and
(c) any
other information relating to the person that would be required to be disclosed
in solicitations of proxies for the election of directors by Regulation 14A
under the Securities Exchange Act of 1934; and
(2) as to
you:
(a) your
name and address
(b) the
number of shares of our Stock of which you are the beneficial owner
and
(c) a
description of any agreements, arrangements or relationships between you and
each person you want to nominate.
Two
inspectors, not affiliated with us, appointed by our Secretary, will determine
whether the notice provisions were met; if they determine that you have not
complied with Article IV(H), your nomination will be disregarded.
The
following table gives information as of March 31, 2008, about each director
nominee and each other director. Unless otherwise indicated, each
person has had the principal occupation shown for at least the past five years.
The Board recommends a vote FOR each of the nominees named therein.
-3-
Directors
Nominees for terms expire in 2011 (Class III Directors)
Directors
whose terms to expire in 2009 (Class I Directors)
Director
whose terms to expire in 2010 (Class II Directors)
-4-
Corporate
Governance
Shareholder, Board and Committee
Meetings.
During 2007 the Board had twelve meetings, and each director attended at least
75% of the total number of meetings held of the Board and committees of which he
or she was a member. While we encourage all Board members to come to
annual shareholder meetings, there is no formal policy as to their
attendance. It is a rare occasion, however, when all members are not
there.
Board
Independence. Each year, our Corporate Governance and
Nominating Committee reviews the relationships that each director has with us
and with other parties. Only those directors who do not have any
relationships that keep them from being independent within the meaning of
applicable American Stock Exchange (“AMEX”) rules and who the Committee finds
have no relationships that would interfere with the exercise of independent
judgment in carrying out their responsibilities are considered to be
“independent directors.” The Committee reviews a number of factors to evaluate
independence, including the directors’ relationships with us and our
competitors, suppliers and customers; their relationships with management and
other directors; the relationships their current and former employers have with
us; and the relationships between us and other companies of which they are
directors or executive officers. After evaluating these factors, the Board
determined that Messrs. Charbonnet, Davis, Hargroder, Hilliard, Kidd, Lemoine,
Pumpelly, Simmons and Tortorice are independent within the meaning of applicable
AMEX rules.
Shareholder
Communications. Shareholders may communicate directly with the
Board or the individual chairmen of committees by writing directly to them at P.
O. Box 3745, Lafayette, LA 70502. We will forward, and not
screen, any mail we receive that is directed to an individual, unless we believe
the communication may pose a security risk.
Code of
Ethics. The Board has adopted a Code of Ethics for our
directors, officers and employees to promote honest and ethical conduct, full
and accurate reporting, and compliance with laws as well as other
matters. A copy of the Code of Ethics is posted on the Corporate
Relations page of our website at www.midsouthbank.com.>
The Board has an Audit Committee, an
Executive Committee, a Personnel Committee, and a Corporate Governance and
Nominating Committee.
The Audit
Committee members are Messrs. Davis, Charbonnet, Hilliard, and Kidd and held
nine meetings in 2007. It is responsible for carrying out the Audit
Committee Charter. The Executive Committee members members are
Messrs. Charbonnet, Cloutier, Hargroder, Pumpelly, and Tortorice and met eleven
times in 2007. Its duties include shareholder relations, Bank
examination and Securities and Exchange Commission (“SEC”)
reporting. The Personnel Committee members are Messrs. Charbonnet,
Davis, Hargroder, and Tortorice and met six times in 2007. It is
responsible for evaluating the performance and setting/approving the
compensation of our executive officers and administering our 2007 Omnibus
Incentive Compensation Plan. The Corporate Governance and Nominating
Committee members are Messrs. Charbonnet, Hargroder, Hilliard and Simmons and
met three times in 2007. It helps the Board to make determinations of director
independence, assess overall and individual Board performance and recommend
director candidates, including recommendations submitted by
shareholders.
-5-
It is the Corporate Governance and
Nominating Committee’s policy that candidates for director have the highest
personal and professional integrity, have demonstrated exceptional ability and
judgment, and have skills and expertise appropriate for serving the long-term
interest of our shareholders. The Committee’s process for identifying
and evaluating nominees is as follows: (1) in the case of incumbent
directors whose terms of office are set to expire, the Committee reviews their
overall service during their terms, including the number of meetings attended,
level of participation, quality of performance, and any related party
transactions with us during the applicable time period; and (2) in the case of
new director candidates, appropriate inquiries into their backgrounds and
qualifications are made after considering the function and needs of the
Board. The Committee meets to discuss and consider such candidates’
qualifications, including whether the nominee is independent within the meaning
of AMEX rules, and then selects a candidate for recommendation to the Board. In
seeking potential nominees, the Committee uses its and management’s network of
contacts to compile a list of potential candidates, but may also engage, if it
deems appropriate, a professional search firm, although to date it has not done
so.
The Committee will consider director
candidates recommended by shareholders who follow the procedures set out in
Article IV (H) of our Articles described elsewhere. It does not
intend to alter the manner in which it evaluates candidates, including the
criteria set forth above, based on whether the candidate was recommended by a
shareholder or otherwise.
Eligible shareholders who want to
present a proposal qualified for inclusion in our proxy materials for the 2009
annual meeting must forward such proposal to our Secretary at the address listed
on the first page of this Proxy Statement in time to arrive before December 25,
2008.
The Securities and Exchange Act of 1934
and applicable SEC regulations require our directors, executive officers and ten
percent shareholders to file with the SEC initial reports of ownership and
reports of changes in ownership of our equity securities, and to furnish us with
copies of all the reports they file. To our knowledge, based on a
review of reports given us, all required reports were filed timely.
___________________ -6-
SECURITY
OWNERSHIP OF MANAGEMENT
AND
CERTAIN BENEFICIAL OWNERS
Security
Ownership of Management
The
following table shows as of March 31, 2008, the beneficial ownership of our
Stock by each director and nominee, by each executive officer named in the
Summary of Executive Compensation Table below, and by all directors and
executive officers as a group. Unless otherwise indicated, the Stock
is held with sole voting and investment power.
_______________
-7-
_______________________ -8-
The
following table shows the number of shares in the Trust and ESOP, and the number
of shares subject to Current Options, that have been included in the above
Ownership Table.
Security
Ownership of Certain Beneficial Owners
The
following lists as of March 31, 2008, the only persons other than the persons
listed in the table above known to us to beneficially own more than five percent
of our Stock.
___________________
_________________________ -9-
Certain
Transactions
Directors,
nominees and executive officers and their associates have been customers of, and
have borrowed from, our bank subsidiaries in the ordinary course of business,
and such transactions are expected to continue in the future. In the
opinion of management, our loan policy is less favorable to those persons than
to other customers.
C. R.
Cloutier and his wife, Brenda Cloutier have pledged 15,000 shares of our Stock
to Whitney Bank securing a loan in the amount of $284,000 for their daughter's
daycare business. Additionally, Mr. and Mrs. Cloutier have pledged
6,979 shares of our Stock to First National Banker's Bank to secure a personal
loan in the amount of $140,000.
James R.
Davis has pledged 27,355 shares of our Stock to Capital One
Investments to secure a $250,000 line of credit.
C. P.
Hilliard has pledged 43,572 shares of our Stock to MidSouth Bank as partial
security on a $1,000,000 line of credit with a balance outstanding of
$296,423.
_________________________
-10-
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
The
following Compensation Discussion and Analysis may contain statements regarding
future individual and company performance targets or goals. We have
disclosed these targets or goals in the limited context of the Company’s
compensation programs; and, therefore, you should not take these statements to
be statements of management’s expectations or estimates of results or other
guidance. We specifically caution investors not to apply such
statements to other contexts.
This
Compensation Discussion and Analysis provides insight into the Company’s
executive compensation programs. It explains the philosophy
underlying our compensation strategy and the fundamental elements of
compensation paid to our Chief Executive Officer, Chief Financial Officer, and
other individuals included in the Summary Compensation Table (“Named Executive
Officers”). Specifically, this Compensation Discussion and Analysis
addresses the following:
During
2007, the Company began a restructuring process to meet the demands and changes
of the business brought on by the rapid growth and increase in size of the
Company. The restructuring process impacted the implementation of
changes in Named Executive Officer compensation during 2007, as well as the
allocation of various compensation elements to these employees during the past
year. Throughout this document we highlight the specific impact of
this process as we discuss the Company’s executive compensation elements and
programs.
The
Personnel Committee of the Board of Directors (“Committee”) administers our
executive compensation programs. During 2007, the Committee consisted
of Will Charbonnet, Sr. (Chairman), James R. Davis, Jr., J. B. Hargroder, M.D.,
and Joseph V. Tortorice, Jr. The members of the Committee all qualify
as independent, outside members of the Board of Directors in accordance with the
requirements of the American Stock Exchange (AMEX), current SEC regulations, and
section 162(m) of the Internal Revenue Code.
Objectives
of Our Compensation Programs
The
Committee has the responsibility for continually monitoring the compensation
paid to our executive officers. The Committee believes that
compensation of our executive officers should encourage creation of stockholder
value and achievement of strategic corporate
objectives. Specifically, the Committee ensures the total
compensation package for our executive officers will serve to:
-11-
What
Our Compensation Programs Are Designed to Reward
Our
executive officers' compensation is designed to reward short term performance as
well as long term performance. Our policy is to provide a large
portion of compensation in cash, including an annual base salary, and an
opportunity to receive an annual incentive that is based on basic earnings per
share (EPS). We provide this to keep the executive officers focused
on current earnings and stability and to strongly align the executives with the
interests of our shareholders. We also view the annual incentive as a
long term performance vehicle because we examine performance measures including
credit quality, credit risk management, deposit growth, regulatory compliance,
return on equity, and growth in our assets and income when assessing incentive
grants to the executive officers. Credit quality, non accruals, and
charge offs are impacted by long term performance such that performance in the
current year affects these measures in future years.
Additionally,
we have historically provided additional compensation benefits through our 1997
Stock Incentive Plan and our Employee Stock Ownership Plan (ESOP), which keeps
the executive officers focused on our long term goals. On a going forward basis,
we will continue with our ESOP and will be providing equity compensation through
our shareholder approved 2007 Omnibus Incentive Plan.
Over the
last several years, our performance has been above average as compared to
similarly situated financial institutions, and the compensation programs are
designed to reward and promote the continuation of this
performance. We aim to provide a substantial portion of executive
officers compensation in the form of performance based compensation through the
annual incentive opportunity. Therefore, the increase in the
executive officers compensation over the past few years is based on this
exceptional performance.
Process
for Determining Executive Officer Compensation
Additionally,
the Committee periodically reviews our incentive plans and other equity based
plans. The Committee reviews, adopts, and submits to the Board of
Directors any proposed arrangement or plan and any amendment to an existing
arrangement or plan that provides or will provide benefits to the executive
officers collectively or to an individual executive officer. The
Committee has sole authority to retain and terminate a compensation consultant
or other advisor as the Committee sees appropriate.
-12-
At the
end of 2007, the Committee engaged Amalfi Consulting LLC (formerly the
Compensation Practice of Clark Consulting) to conduct an overall compensation
review of the Company’s top executive employees, including all of the five Named
Executive Officers presented in this proxy. The results of the
compensation review will be used on a going-forward basis in making compensation
decisions related to the top executive employees of the Company.
In
addition to the overall compensation review, Amalfi Consulting LLC assisted the
Company with the creation of plan documents related to executive compensation
programs and with the production of this proxy filing. Amalfi
Consulting LLC reported directly to the Committee on all projects conducted and
performed no other services for the Company in 2007.
• Benchmarking>. To ensure the
competitiveness of our total compensation package, the Committee uses salary
survey information from several different nationally recognized surveys that
focus on our industry and region. Specifically, the Company used salary survey
information compiled by K G & Associates that included surveys from Watson
Wyatt and Mercer. This information was used to evaluate how
comparable institutions are paying their executive management. In
2007, K G & Associates conducted no other business with the
Company. Along with the data compiled by K G & Associates, the
Committee considered data from an additional compensation survey conducted by
Scheshunoff Management Services.
In using
survey data, we benchmark both base salary and annual incentive. Long
term incentives are not benchmarked because we feel that long term incentives
are not part of the basic compensation of the executive
officers. Long term incentives are viewed as an additional
opportunity for the executive officer based on the value of our stock
price.
Based on
our prior year earnings, the total cash compensation paid to the Named Executive
Officers, which includes base salary and annual incentive, is approximately at
the 75th
percentile of compensation market levels as reported by the
surveys.
As noted
earlier, at the end of 2007 the Committee, in coordination with Amalfi
Consulting LLC, conducted an overall review of the executive compensation
program. As part of this review, a peer group of 20 banks comparable
to MidSouth in terms of geographic location, asset size, growth and performance
was selected. We present the peer group in the table below. Values
reported in the table are as of year-end 2006. -13-
Benchmarking
Peer Group
Although
we did not use the data from this review to assess or change compensation
programs for our Named Executive Officers during 2007, we plan to use the
information from the review to make decisions on a going-forward basis for
2008.
Elements
of Compensation
We have
determined that it is our and our shareholders’ best interest to provide
competitive compensation to attract and retain the most qualified executive
officers with demonstrated leadership abilities that will secure our
future. We do this by providing compensation that is tied to our
short and long term performance goals to motivate our executive officers to
attain these goals.
The
performance goals that we examine may include credit quality, credit risk
management, deposit growth, regulatory compliance, return on equity, and growth
in our assets and income.
We have
not made any material changes in individual compensation in 2007 compared to
2006. In addition, due to possible changes in roles and
responsibilities as a result of the restructuring, adjustments to base salary
salaries and other compensation elements have been postponed until
2008.
-14-
The
elements of compensation used during 2007 to compensate the executive officers
include:
Below is
a discussion of each element of compensation listed above, including the purpose
of each element of compensation, why we elect to pay each element of
compensation, how each element of compensation was determined by the Committee,
and how each element and our decisions regarding the payment of each element
relate to our goals.
• Base Salary>. Although we favor
the use of incentive compensation, we believe it is necessary and prudent to pay
a portion of total compensation in the form of a competitive fixed base
salary. We believe the payment of a fixed base salary to our
executive officers helps maintain productivity by minimizing anxiety that a
financial or industry slump could impair their personal and family
planning.
It is our
goal to set base salary to reflect the role and responsibility of the executive
officer over time and to comfortably meet the executive’s needs. Base
salary, although not directly connected to performance, is essential to compete
for talent and our failure to pay a competitive base salary could harm our
ability to recruit and retain management. Base salary was initially
determined by analyzing base salaries of comparable executives in the
marketplace and considering the abilities, qualifications, accomplishments,
prior work experience, and cost of living of the executive officer.
When
setting base salary levels, the Committee takes into account the total direct
cash compensation amount targeted for each executive. Essentially,
base salary is established by determining the amount of money in combination
with the anticipated amount of annual incentive that was necessary to attract
and retain top caliber executive officers.
Base
salary adjustments are generally considered annually in December on a
discretionary basis and take into account the executive officer’s individual
performance over the prior year, changes in the executive officer’s
responsibilities, our performance, and market levels of
compensation.
In
December of 2005 and 2006, the Committee recommended to the Board 2006 and 2007
base salary for the Chief Executive Officer and in consultation with the Chief
Executive Officer 2006 and 2007 base salary for the other executive officers
except for Mr. Corrigan’s 2006 base salary. Mr. Corrigan was hired
during 2006 and his base salary for 2006 was set by the Chief Executive Officer
and approved by the Committee upon his hire date.
-15-
Base
salary for 2006 and 2007 for each of the Named Executive Officers is as
follows:
The 13.9%
increase for Mr. Utz reflects both an increase in job responsibility occurring
in 2007, and a market pay adjustment. The 6.1% increase for Mr.
Corrigan is based upon terms of his employment agreement associated with his
hire in 2006. Other increases reflect normal merit and market
adjustments.
As noted
earlier, due to the restructuring activities of the Company decisions on bases
salary adjustment for 2008 have not been determined. Once base salary
decisions have been made, the new salaries will be made effective retroactively
to January 1, 2008.
• Annual Incentives>. Annual
incentives are provided to the executive officers through the Company’s
Incentive Compensation Plan (CICP).
Company’s
Incentive Compensation Plan (CICP)
Annual
incentives are primarily designed to reward increased shareholder value as well
as to focus the executive officers on our goals for a particular year and to
reward executive officers upon achievement of those goals. We believe
annual incentives are an important element of executive officers’ compensation
because they provide the incentive and motivation to lead us in achieving
success. The annual incentive under the CICP is tied to basic earnings per share
(EPS) and makes up a very significant part of the executive officer’s
compensation. If the executive officer is able to significantly
improve our performance then the executive officer will have a significant
increase in annual incentive for the year. If the performance is
below expectations then the executive officer will have a reduction in
compensation.
We use a
system of annual incentives to reward the executive officers quarterly based on
EPS. Before the beginning of each year, the Committee awards each
executive officer a specified number of phantom shares of our
stock. Annual incentive is determined quarterly equal to the number
of phantom shares times our basic EPS for the quarter. Sixty percent
of the amount determined is paid each quarter and the balance is paid at the end
of the year, provided we were profitable for the entire year. If we
are not profitable for the year (i.e., the fourth quarter results in a large
loss) then the balance that was held back will not be paid.
The
number of phantom shares granted each year is generally considered in December
on a discretionary basis and takes into account the executive officer’s
individual performance compared to the prior year, his or her importance to us,
and our overall financial performance. The granting of phantom shares
as the annual incentive in lieu of awarding cash bonuses is preferred by the
Committee.
-16-
In
December of 2006 and 2007, the Committee granted phantom shares for 2007 and
2008 to each of the Named Executive Officers. Phantom shares were
granted to the Named Executive Officers for 2007 and 2008 as
follows:
(1) Both
earned and estimated amounts based upon a 12/31/2007 basic undiluted EPS value
of $1.34. The share numbers were adjusted during 2007 to reflect a 5%
stock dividend on September 19, 2007. The number of shares for 2007
represents the amount of shares allocated at the beginning of the plan year. The
2008 numbers reflect the impact of the 5% stock dividend.
The
Company did make contributions to the ESOP in 2007 on behalf of the Named
Executive Officers. It is our belief that executive officers need to
have a significant interest tied to long term performance and increasing
shareholder value. We believe the best way to accomplish this is
through stock ownership of the Company. We encourage executive
officers to own stock and provide the following programs to encourage stock
ownership. We describe our employee stock ownership plan, our 1997 Stock
Incentive Plan, and our 2007 Omnibus Incentive Compensation Plan
below.
Employee Stock Ownership
Plan: To encourage ownership by all employees and therefore
tie their interest to the interests of the shareholders, we established an
employee stock ownership plan (“ESOP”) in 1986. The ESOP covers all
employees who meet minimum age and service requirements. We make annual
contributions to the ESOP in amounts as determined by the Board of
Directors.
1997 Stock Incentive
Plan: In addition to the ESOP, we have periodically granted
stock options to executive officers and other senior employees. Our
policy has been to grant stock options to executive officers to ensure that they
have options currently outstanding. To the extent that the executive
officer has unvested options outstanding, we feel that the executive officer is
tied to our long term performance and will only grant additional awards to the
extent that all awards are vested. We have historically granted to executive
officers stock options that vest 20% per year over a 5 year
period. During 2007, this equity-based incentive plan was replaced
with the shareholder approved omnibus incentive plan described
below.
2007 Omnibus Incentive
Plan: In 2007 we received shareholder approval for an Omnibus
Incentive Plan.
-17-
No equity
awards were made under this plan in 2007. This plan provides the
Company with flexibility in the design and implementation of long-term equity
award programs. Under this plan the Committee may award a variety of
forms of equity such as restricted stock, stock appreciation rights, and
performance shares. For details on the plan please refer to the
Company’s 2007 Proxy filed on May 30, 2007.
Stock
option grants always have an exercise price equal to our stock price at the time
they are awarded. We never engaged in the back-dating of stock
options nor have we retroactively modified our stock option awards.
We grant
stock options upon hire of an executive officer, upon exceptional achievement,
or to ensure that an executive officer has outstanding unvested
options. We did not provide any additional long term compensation
under the Stock Incentive Plan in 2007
We
believe that stock options are the preferable method of incenting and rewarding
long term performance because stock options provide incentive to increase
shareholder value and serve as a good retention vehicle for the Named Executive
Officers.
• Perquisites>. The Company
provided the following perquisites in 2007 to certain executive
officers:
The total
cost for all of these perquisites was approximately $38,000. We
provide further details on perquisites in a supplementary table following the
Summary Compensation Table in this document.
The Named
Executive Officers are all eligible to receive additional perquisites if the
Committee so determines. We view certain perquisites as beneficial to us as well
as compensation to the executive officers. For example, the club
memberships are regularly used in the general course of our business such as for
business meetings or entertaining. The Company cars are used
primarily for business purposes.
We have
entered into Executive Indexed Salary Continuation Agreements with Mr. Cloutier,
Ms. Hail, and Mr. Landry. The agreements provide that upon the
executive officer reaching normal retirement age the executive officer will
receive payment of amounts as defined in the agreement and presented in the
narrative of the Nonqualified
Deferred Compensation section of this document.
-18-
The
Company maintains a split dollar insurance arrangement with Mr. Cloutier, Ms.
Hail and Mr. Landry. The arrangement provides benefits to the
executive officer’s designated beneficiary in the event of the executive
officer’s death.
Additionally,
we provide Mr. Cloutier, Ms. Hail and Mr. Landry with a supplemental Term Life
Insurance Policy payable to a beneficiary of their choice and a supplemental
long-term disability policy. We provide additional details on the
benefits provided under these policies in the Potential Payments Upon Termination
or Change in Control section.
In the
figures on the following page, we present the actual pay mix results during 2006
and 2007 for each of our NEOs. Because Mr. Corrigan was hired in
mid-2006, we only present his first complete year of employment at the
Company.
  -19-
   Other
Important Compensation Policies Affecting Executive Officers
We have
never retroactively modified incentives or equity based compensation for our
employees.
The
Incentive Compensation Plan pays out quarterly based on our EPS for each
quarter; however, only 60% of the value is paid out. The remaining
40% is held back until after year-end earnings have been
determined. If there is a decline in earnings for the year, amounts
held back may not be paid to the executive officers as the annual incentive is
based on our EPS.
-20-
In
connection with the compensation of our executive officers, the Committee is
aware of section 162(m) as it relates to deductibility of qualifying
compensation paid to executive officers. The Committee believes that
compensation to be paid in 2007 will not exceed the deductibility limitations on
non-excluded compensation to certain executive officers.
All of
the employment agreements have trigger events that provide for the payment of
severance to the executive officer upon certain termination
events. We have included these trigger events in the employment
agreements to provide a safe harbor so that the executive officer can provide
services to us without being concerned about his/her
employment.
We do not
maintain a separate severance plan for our executive
officers. Severance benefits for our executive officers are limited
to those as set forth in the respective executive officer’s employment agreement
with us.
Set forth
below are the general terms and conditions of each of the employment
agreements. Each executive has the right to voluntarily terminate
his/her employment at any time.
___________________
-21-
General
C.R.
Cloutier - Chief Executive Officer
Karen
L. Hail - Chief Operating Officer
Each
employment agreement is a one-year written agreement and is automatically
extended for one year every year thereafter, unless written notice of
termination is given by any party to the agreement not later than 60 days before
the end of the year. Under Mr. Cloutier's and Ms. Hail's agreement,
each of them receive a minimum annual base salary, term life insurance in the
amount of four times annual base salary payable to a beneficiary of his or her
choice, disability insurance of not less than two-thirds of annual base salary,
an automobile furnished by the Company (including insurance, gasoline, and other
routine maintenance), membership at a health club, and membership at a dinner
club.
In the
event that we terminate Mr. Cloutier’s or Ms. Hail's employment or do not extend
the agreement, each will be entitled to severance pay equal to annual base
salary at the time of termination. We will not be obligated to pay
any severance pay in the event that he or she terminates voluntarily or is
removed by a regulatory body.
Upon a
change in control of the Company, Mr. Cloutier or Ms. Hail each has the right to
resign employment for Good Reason and receive as severance pay a sum equal to
annual base salary immediately prior to the change in control, payable in twelve
equal installments. Good Reason is deemed to occur upon one of the
following events:
None of
the executive officers is entitled to receive a Gross-Up payment in the event
that he or she is subject to section 280G excise tax pursuant to a change in
control of the Company.
J.
Eustis Corrigan, Jr. - Chief Financial Officer
Mr.
Corrigan’s employment agreement provides that he will receive a minimum annual
base salary and is eligible to receive all standard benefits provided by us to
other employees in positions comparable to his position. We are
required to reimburse him for his COBRA premiums being paid in connection with
his separation of employment from his previous employer until the date that he
becomes eligible to participate in our group health insurance
programs. In addition, Mr. Corrigan received an initial grant of
30,000 phantom shares under the Incentive Compensation Plan and 15,000 stock
options under our Stock Incentive Plan. These amounts have been
adjusted accordingly for the 5:4 stock split on October 24, 2006, and the 5%
stock dividend on September 19, 2007. We are required to provide him
with either a health club membership or a country club
membership. The agreement also provides for the reimbursement of
moving expenses incurred by Mr. Corrigan in moving from Texas to Lafayette and a
signing bonus of $10,000. Both the moving expense reimbursement and
signing bonus are earned over a three-year period beginning upon date of
hire.
-22-
Upon the
occurrence of a change in control of the Company during the first five years of
Mr. Corrigan’s employment, Mr. Corrigan shall receive a sum equal to two times
his annual base salary plus his prior year annual incentive payable in equal
installments over twenty-four months in the event that his employment is
involuntarily terminated by the Company.
COMPENSATION
COMMITTEE REPORT
The
Personnel Committee has reviewed and discussed the Compensation Discussion and
Analysis with management. Based upon such review, the related
discussions and such other matters deemed relevant and appropriate to the
Personnel Committee, the Personnel Committee has recommended to the Board of
Directors that the Compensation Discussion and Analysis be included in this
Proxy Statement to be delivered to shareholders.
Submitted by the Personnel
Committee:
Will Charbonnet Sr.,
Chairman
James R. Davis, Jr.
J. B. Hargroder, M.D.
Joseph V. Tortorice, Jr.
-23-
SUMMARY
COMPENSATION TABLE
The
Summary Compensation Table below displays the total compensation awarded to,
earned by or paid to the Named Executive Officers for 2006 and
2007. All amounts shown below are in dollars.
___________________
-24-
___________________
___________________
-25-
GRANTS
OF PLAN BASED AWARDS
The
Grants of Plan Based Awards Table discloses the total number of non-equity
incentive based plan awards actually granted in 2007. There were no
grants of equity incentive plan awards during 2007. The Grants of
Plan Based Awards Table should be read in conjunction with the Summary
Compensation Table. The Summary Compensation Table reflects the
portion of stock option awards made in previous years recognized for financial
statement reporting purposes during 2007.
___________________
___________________
-26-
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR END
The
Outstanding Equity Awards at Fiscal Year End Table reflects each Named Executive
Officer’s unexercised option award holdings at December 31, 2007 on an
individual award basis. There were no stock awards outstanding as of
December 31, 2007.
___________________
___________________ -27-
OPTION
EXERCISES AND STOCK VESTED
The
Option Exercises and Stock Vested Table provides the stock options exercised by
each of the Named Executive Officers during 2007.
___________________
(1) Reflects
the difference between $26.28, the closing price of the stock on 2/1/07, and
$3.36, the exercise price of the options.
(2) Reflects
the difference between $27.10, the closing price of the stock on 2/23/06, and
$7.77, the exercise price of the options.
(3) Reflects
the difference between $23.63, the closing price of the stock on 7/13/07, and
$6.55, the exercise price of the options.
___________________ -28-
PENSION
BENEFITS
The
Company does not provide pension benefits to the Named Executive
Officers. The Company has entered into an Executive Indexed Salary
Continuation Agreement with Mr. Cloutier, Ms. Hail and Mr.
Landry. The agreements provide benefits to the executive officers
upon reaching normal retirement age and are categorized as a nonqualified
deferred compensation benefit. We discuss the details of this
arrangement and present the amounts in the Nonqualified Deferred Compensation
section below.
NONQUALIFIED
DEFERRED COMPENSATION
The
Company provides Mr. Cloutier, Ms. Hail, and Mr. Landry with an Executive
Indexed Salary Continuation Agreement which establishes a Pre-Retirement
Account. Upon the executive officer reaching normal retirement age,
he or she will receive payment of the Pre-Retirement Account made in annual
installments over 10 years. The Pre-Retirement Account has been
established as a liability reserve account on our books for the benefit of the
executive officer. The account is increased or decreased each year by
an amount equal to the Index (annual earnings/loss for the year determined by
the aggregate annual after-tax income as if potential life insurance contracts
were purchased on the effective date of the agreement) less the cost of funds
expense for that year (sum of the amount of premiums set forth in the potential
life insurance contracts purchased on the effective date of the agreement, plus
the amount of any after-tax benefits paid to the executive officer plus the
amount of all previous years after-tax costs of funds expense and multiplying
the sum by the average after-tax cost of funds of the Company’s third quarter
call report for the year as filed with the Federal Reserve).
If the
executive officer voluntarily terminates or we terminate the executive officer
(not for cause) prior to normal retirement age, the executive officer will be
entitled to receive 20% times the number of full years he or she has served from
the date of the agreement (to a maximum of 100%) times the balance in the
Pre-Retirement Account (as described above). The benefit is payable
over 10 years in equal installments beginning on the date the executive officer
reaches normal retirement age.
If the
executive officer dies before having received the full balance of the
Pre-Retirement Account, the unpaid balance will be paid in a lump sum to the
executive officer’s designated beneficiary.
In the
event of a change of control of the Company and the executive officer’s
employment is terminated, the executive officer receives the benefits as
promised under the agreement upon attaining normal retirement age as if he/she
had been continuously employed by us through normal retirement
age. Please refer to the Potential Payments Upon Termination
or Change of Control section of this document for details of payouts
under various termination scenarios. The nonqualified deferred
compensation amounts deposited in the Pre-Retirement Accounts is included the
table which follows.
In
addition to the deferred compensation provided under the Executive Indexed
Salary Continuation Agreement, we provide a Director’s Deferred Compensation
Plan to all Company directors, including Named Executive Officers serving on our
Board. Mr. Cloutier and Ms. Hail are the only Named Executive
Officers with a balance in this deferred compensation plan. We
provide details on this plan within the Compensation of Directors
section of this proxy.
-29-
The
Nonqualified Deferred Compensation Table reflects the activity during the 2007
calendar year for each of the Named Executive Officers eligible for the
Company’s deferred compensation benefits.
Nonqualified
Deferred Compensation
___________________
___________________ -30-
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
This
section discusses the incremental compensation that would be payable by the
Company to each Named Executive Officer in the event of his or her termination
of employment under various scenarios (“termination events”) including voluntary
resignation, involuntary termination, termination without cause or for Good
Reason in connection with a change in control, termination in the event of
disability, termination in the event of death, and termination in the event of
retirement. In accordance with applicable SEC rules, the following
discussion assumes:
(i) that
the termination event in question occurred on December 31, 2007;
and
(ii) with
respect to calculations based on our stock price, we used $23.22, which was the
reported closing price of one share of the Company’s common stock on December
31, 2007, the last business day of 2007.
Pursuant
to applicable SEC rules, the analysis contained in this section does not
consider or include payments made to a Named Executive Officer with respect to
contracts, agreements, plans or arrangements to the extent they do not
discriminate in scope, terms or operation, in favor of executive officers of the
Company and that are available generally to all salaried employees, such as the
Company’s 401(k) Plan. The actual amounts that would be paid upon a
Named Executive Officer’s termination of employment can only be determined at
the time of such executive officer’s termination. Due to the number
of factors that affect the nature and amount of any compensation or benefits
provided upon the termination events, any actual amounts paid or distributed may
be higher or lower than reported below. Factors that could affect
these amounts include the timing during the year of any such event and our stock
price.
All
outstanding stock options granted pursuant to the 1997 Stock Incentive Plan
automatically become fully exercisable upon a change in control of the Company,
as defined in the plan document. Upon termination for cause, all
executives forfeit any balances in pre-retirement accounts and any cash
severance payments. We present details for the other termination
scenarios below.
C.R.
Cloutier
Upon
voluntary resignation, Mr. Cloutier receives the balance in his pre-retirement
account paid out in equal annual installments over a ten-year period beginning
at the age of 65. The value presented in the table is the present
value of this benefit.
Mr.
Cloutier will receive a lump sum equal to one times base salary in the event of
involuntary termination without cause. In addition to the cash
severance, Mr. Cloutier receives the balance in his pre-retirement account paid
out in equal annual installments over a ten-year period beginning at the age of
65. The value presented in the table is the present value of this
benefit.
In the
event of termination without cause or for good reason in connection with a
change-in-control, Mr. Cloutier will receive one times base salary payable in
equal installments over 12 months. He will also receive the benefit
specified under the terms of his Executive Indexed Salary Continuation Plan as
if he had been continuously employed until his normal retirement age of
65. The value presented in the table is the present value of this
benefit.
-31-
Upon
death, Mr. Cloutier’s beneficiaries will receive the benefit as defined under
his supplemental life insurance policy and 80% of the death benefit of the whole
life policy associated with the Executive Indexed Salary Continuation
Plan. In addition, his beneficiaries will receive a lump-sum payment
of the unpaid accrued benefit balance in his pre-retirement account associated
with the Executive Indexed Salary Continuation Plan.
Upon
long-term disability, Mr. Cloutier will receive the benefit presented in the
table as specified under his supplemental long-term disability
policy. Mr. Cloutier also receives the balance in his pre-retirement
account paid out in equal annual installments over a ten-year period beginning
at the age of 65. The value presented in the table is the present
value of this benefit.
Karen
L. Hail
Upon
voluntary resignation, Ms. Hail receives the balance in her pre-retirement
account paid out in equal annual installments over a ten-year period beginning
at the age of 65. The value presented in the table is the present
value of this benefit.
Ms. Hail
will receive a lump sum equal to one times base salary in the event of
involuntary termination. In addition to the cash severance, Ms. Hail
receives the balance in her pre-retirement account paid out in equal annual
installments over a ten-year period beginning at the age of 65.
In the
event of termination without cause or for good reason in connection with a
change-in-control, Ms. Hail will receive on times base salary payable in equal
installments over 12 months. She will also receive the benefit
specified under the terms of her Executive Indexed Salary Continuation Plan as
if she had been continuously employed until her normal retirement age of
65. The value presented in the table is the present value of this
benefit.
Upon
death, Ms. Hail’s beneficiaries will receive the benefit as defined under her
supplemental life insurance policy and 80% of the death benefit of the whole
life policy associated with the Executive Indexed Salary Continuation
Plan. In addition, her beneficiaries will receive a lump-sum payment
of the unpaid accrued benefit balance in her pre-retirement account associated
with the Executive Indexed Salary Continuation Plan.
Upon
long-term disability, Ms. Hail will receive the benefit presented in the table
as specified under her supplemental long-term disability policy. Ms.
Hail also receives the balance in her pre-retirement account paid out in equal
annual installments over a ten-year period beginning at the age of
65. The value presented in the table is the present value of this
benefit.
J.
Eustis Corrigan, Jr.
In the
event of a termination without cause or for good reason, in connection with a
change-in-control, Mr. Corrigan will receive two times the total of base salary
payable and incentives earned in the prior year under the Company’s annual
incentive plan. The payments will be made in equal installments over
24 months.
-32-
In
addition, per the terms of the Stock Incentive Plan, all unvested options will
immediately vest and become exercisable in connection with a
change-in-control. Mr. Corrigan is not eligible for any other forms
of compensation.
Donald
R. Landry
We are
not contractually obligated to provide Mr. Landry with a cash severance payment
upon termination.
Upon
voluntary resignation or involuntary termination without cause, Mr. Landry
receives the balance in his pre-retirement account paid out in equal annual
installments over a ten-year period beginning at the age of 65. The
value presented in the table is the present value of this benefit.
In the
event of termination without cause or for good reason in connection with a
change-in-control, Mr. Landry will receive the benefit specified under the terms
of his Executive Indexed Salary Continuation Plan as if he had been continuously
employed until his normal retirement age of 65. The value presented
in the table is the present value of this benefit.
Upon
death, Mr. Landry’s beneficiaries will receive the benefit as defined under his
supplemental life insurance policy and 80% of the death benefit of the whole
life policy associated with the Executive Indexed Salary Continuation
Plan. In addition, his beneficiaries will receive a lump-sum payment
of the unpaid accrued benefit balance in his pre-retirement account associated
with the Executive Indexed Salary Continuation Plan.
Upon
long-term disability, Mr. Landry will receive the benefit presented in the table
as specified under his supplemental long-term disability policy. Mr.
Landry also receives the balance in his pre-retirement account paid out in equal
annual installments over a ten-year period beginning at the age of
65. The value presented in the table is the present value of this
benefit.
A.
Dwight Utz
We are
not contractually obligated to provide Mr. Utz with a severance payment upon
termination; however, he will receive benefits under the Company’s Stock
Incentive Plan in the event of a change in control (no termination requirement
applies). Per the terms of the Stock Incentive Plan, all unvested
options will immediately vest and become exercisable in connection with a
change-in-control. There is no termination requirement placed upon
the acceleration of the vesting.
-33-
The table
below indicates the amount of compensation payable to each Named Executive
Officer, including cash severance, insurance benefits, indexed salary
continuation benefits, and stock option awards, as applicable upon different
termination events. The amounts shown assume a termination date of
December 31, 2007 and present total amounts for each scenario.
Potential Payments Upon Termination or Change-in-Control
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