SCHEDULE 14-A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant []
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Fidelity Bankshares, Inc.
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(Name of Registrant as Specified In Its Charter)
Alan Schick, Luse Lehman Gorman Pomerenk & Schick, PC
--------------------------------------------------------
(Name of Person(s) Filling Proxy Statement)
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:
.......................................................................
4) Proposed maximum aggregate value of transaction:
.......................................................................
5) Total fee paid:
.......................................................................
[ ] Fee previously paid:
[ ] 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:
March 23, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Fidelity Bankshares, Inc. (the "Company"). The Annual Meeting will be held at
the Crowne Plaza Hotel, 1601 Belvedere Road, West Palm Beach, Florida, at 10:00
a.m., (local time) on April 17, 2001.
The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted.
The Annual Meeting is being held so that stockholders will be given an
opportunity to elect three directors and to ratify the appointment of Deloitte &
Touche LLP as auditors for the Company's 2001 fiscal year.
The Board of Directors of the Company has determined that the matters to be
considered at the Annual Meeting are in the best interest of the Company and its
stockholders. For the reasons set forth in the proxy statement, the Board of
Directors unanimously recommends a vote "FOR" each matter to be considered.
On behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy card as soon as possible even if you currently plan to attend the
Annual Meeting. Your vote is important, regardless of the number of shares that
you own. Voting by proxy will not prevent you from voting in person, but will
assure that your vote is counted if you are unable to attend the meeting.
Sincerely,
/s/ Vince A. Elhilow
Vince A. Elhilow
President and Chief Executive Officer
Fidelity Bankshares, Inc.
205 Datura Street
West Palm Beach, Florida 33401
(561) 659-9900
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On April 17, 2001
Notice is hereby given that the Annual Meeting of Fidelity Bankshares,
Inc. (the "Company") will be held at the Crowne Plaza Hotel, 1601 Belvedere
Road, West Palm Beach, Florida, at 10:00 a.m., (local time) on April 17, 2001.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Company;
2. The ratification of the appointment of Deloitte & Touche LLP
as auditors for the Company for the fiscal year ended December
31, 2001; and
such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual
Meeting on the date specified above, or on any date or dates to which by
original or later adjournment the Annual Meeting may be adjourned. Stockholders
of record at the close of business on March 2, 2001 are the stockholders
entitled to vote at the Annual Meeting, and any adjournments thereof.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING,
IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE
HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL
MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN
ORDER TO VOTE PERSONALLY AT THE ANNUAL MEETING.
By Order of the Board of Directors
Elizabeth M. Cook
------------------
Secretary
West Palm Beach, Florida
March 23, 2001
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IMPORTANT: A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
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PROXY STATEMENT
of
FIDELITY BANKSHARES, INC.
205 Datura Street
West Palm Beach, Florida 33401
(561) 659-9900
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ANNUAL MEETING OF STOCKHOLDERS
April 17, 2001
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This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Fidelity Bankshares, Inc. (the
"Company") to be used at the Annual Meeting of Stockholders of the Company (the
"Meeting"), which will be held at the Crowne Plaza Hotel, 1601 Belvedere Road,
West Palm Beach, Florida on April 17, 2001 at 10:00 a.m., local time, and all
adjournments thereof. The accompanying Notice of Annual Meeting of Stockholders
and this Proxy Statement are first being mailed to stockholders on or about
March 23, 2001.
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REVOCATION OF PROXIES
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Stockholders who execute proxies in the form solicited hereby retain
the right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given thereon. Where
no instructions are indicated, proxies will be voted "FOR" the proposals set
forth in this Proxy Statement for consideration at the Meeting.
Proxies may be revoked by sending written notice of revocation to the
Secretary of the Company, Elizabeth M. Cook , at the address of the Company
shown above or the receipt of a later dated proxy by the Company. The presence
at the Meeting of any stockholder who had given a proxy shall not revoke such
proxy unless the stockholder delivers his or her ballot in person at the Meeting
or delivers a written revocation to the Secretary of the Company prior to the
voting of such proxy.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Holders of record of the Company's common stock, par value $.10 per
share (the "Common Stock"), as of the close of business on March 2, 2001 (the
"Record Date") are entitled to one vote for each share then held. As of the
Record Date, the Company had 6,512,434 shares of Common Stock issued and
outstanding. The presence in person or by proxy of a majority of the outstanding
shares of Common Stock entitled to vote is necessary to constitute a quorum at
the Meeting.
Persons and groups who beneficially own in excess of five percent of
the Common Stock are required to file certain reports with the Securities and
Exchange Commission ("SEC") regarding such ownership pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"). The following table sets forth, as of
the Record Date, the shares of Common Stock beneficially owned by named
executive officers individually, by executive officers and directors as a group
and by each person who was the beneficial owner of more than five percent of the
Company's outstanding shares of Common Stock on the Record Date. The shares of
Common Stock beneficially owned by directors individually are listed under
Proposal I--Election of Directors.
1
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table provides the beneficial ownership of our common
stock held by our directors and executive officers, individually and as a group
as of December 31, 2000. The business address of each director and executive
officer is 205 Datura Street, West Palm Beach, Florida.
Number of Shares Percent of All Percent of
Name of of Common Stock Common Stock Publicly Held
Beneficial Owner Beneficially Owned(1) Outstanding(1) Common Stock(2)
- ------------------------ --------------------- -------------- ----------------
Vince A. Elhilow(3) 133,784 2.05% 4.59%
Joseph B. Shearouse, Jr. 62,320 0.96 2.14
Keith D. Beaty(4) 32,393 0.50 1.11
Paul C. Bremer 2,000 0.03 0.07
F. Ted Brown, Jr.(5) 32,395 0.50 1.11
Donald E. Warren, M.D.(6) 28,259 0.43 0.97
Karl H. Watson 1,000 0.02 0.03
Richard D. Aldred(7) 39,512 0.61 1.36
J. Robert McDonald(8) 52,073 0.80 1.79
Joseph C. Bova(9) 29,370 0.44 1.01
Robert L. Fugate(10) 43,373 0.67 1.49
Christopher C. Cook(11) 7,169 0.11 0.25
All directors and executive
Officers as a group.(12) 463,648 7.12% 15.92%
- --------------------
(1) Based upon 6,511,084 shares outstanding.
(2) Based upon 2,912,584 shares held by persons other than Fidelity Bankshares,
Inc.
(3) Includes 12,500 shares of common stock subject to options pursuant to the
stock option plan that may be exercised within 60 days of the record date
and 28,810 shares held by the management performance plan. Includes 4,598
shares allocated under the Fidelity Federal Bank and Trust's employee stock
ownership plan. Includes 12,571 shares held under the savings plan for
employees for the benefit of Mr. Elhilow.
(4) Includes 15,180 shares subject to options that may be exercised within 60
days pursuant to the directors' stock option plan.
(5) Includes 8,000 shares subject to options that may be exercised within 60
days pursuant to the directors' stock option plan.
(6) Includes 15,180 shares subject to options that may be exercised within 60
days pursuant to the directors' stock option plan.
(7) Includes 6,724 shares of common stock subject to options pursuant to the
stock option plan and 8,654 shares held by the management performance plan.
Includes 4,373 shares allocated under the Fidelity Federal Bank and Trust's
employee stock ownership plan. Includes 4,138 shares held under the
savings plan for employees for the benefit of Mr. Aldred.
(8) Includes 18,243 shares held by the management performance plan. Includes
3,983 shares allocated under the Fidelity Federal Bank and Trust's employee
stock ownership plan. Includes 8,616 shares held under the savings plan for
employees for the benefit of Mr. McDonald.
(9) Includes 9,055 shares of common stock subject to options pursuant to the
stock option plan and 5,329 shares held by the management performance plan.
Includes 4,251 shares allocated under the Fidelity Federal Bank and Trust's
employee stock ownership plan. Includes 7,156 shares held under the savings
plan for employees for the benefit of Mr. Bova.
(10) Includes 4,862 shares of common stock subject to options pursuant to the
stock option plan and 7,819 shares held by the management performance plan.
Includes 3,813 shares allocated under the Fidelity Federal Bank and Trust's
employee stock ownership plan. Includes 12,479 shares held under the
savings plan for employees for the benefit of Mr. Fugate.
(11) Includes 1,996 shares subject to options that may be exercised pursuant to
the directors' plan. Includes 573 shares allocated under the Fidelity
Federal Bank and Trust's employee stock ownership plan.
(12) Unless otherwise indicated, includes shares held directly by the
individuals as well as by spouses, in trust, and other indirect forms of
ownership over which shares the individuals effectively exercise sole or
shared voting and investment power. Includes 38,360 shares of common stock
which outside directors of Fidelity Bankshares, Inc. have the right to
acquire within 60 days of the record date pursuant to the exercise of stock
options granted under the Fidelity Federal Bank and Trust stock option plan
for outside directors.
2
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PROPOSAL I--ELECTION OF DIRECTORS
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The Company's Board of Directors is composed of seven members. The
Company's bylaws provide that approximately one-third of the directors are to be
elected annually. Directors of the Company are generally elected to serve for a
three year period or until their respective successors shall have been elected
and shall qualify. The terms of the Board of Directors are classified so that
approximately one-third of the directors are up for election in any one year.
Three directors will be elected at the Meeting. The Board of Directors has
nominated to serve as directors Paul C. Bremer, F. Ted Brown, Jr. and Karl H.
Watson, each to serve for a three-year term.
The table below sets forth certain information regarding the
composition of the Company's Board of Directors, including the terms of office
of Board members. Historical information relates to the Bank and its mutual
predecessor. It is intended that the proxies solicited on behalf of the Board of
Directors (other than proxies in which the vote is withheld as to one or more
nominees) will be voted at the Meeting for the election of the nominees
identified below. If any nominee is unable to serve, the shares represented by
all such proxies will be voted for the election of such substitute as the Board
of Directors may recommend. At this time, the Board of Directors knows of no
reason why any of the nominees might be unable to serve, if elected. Except as
indicated herein, there are no arrangements or understandings between any
nominee and any other person pursuant to which such nominee was selected.
Director Current Term
Name Age Positions Held Since (1) to Expire
- ------------------ -------- -------------------- --------- -----------
NOMINEES
Paul C. Bremer 57 Director 2000 2001
F. Ted Brown, Jr. 71 Director 1990 2001
Karl H. Watson 59 Director 1999 2001
DIRECTORS CONTINUING IN OFFICE
Keith D. Beaty 50 Director 1992 2002
Joseph B. Shearouse, Jr. 77 Chairman of the Board 1961 2002
Vince A. Elhilow 61 President and Chief 1984 2003
Executive Officer
Donald E. Warren, M.D. 73 Director 1979 2003
The principal occupation during the past five years of each director
and executive officer of the Company is set forth below. All directors and
executive officers have held their present positions for five years unless
otherwise stated.
Vince A. Elhilow has been President of Fidelity Federal Bank and Trust
since 1987 and Chief Executive Officer of Fidelity Federal Bank and Trust since
1992. Prior to his appointment as President of Fidelity Federal Bank and Trust,
Mr. Elhilow was manager of the Mortgage Loan Department from 1973 to 1992 and
Executive Vice President and Chief Operating Officer from 1981 to 1987. Mr.
Elhilow joined Fidelity Federal Bank and Trust in January 1963 and has been a
Director since 1984.
Joseph B. Shearouse, Jr. is Chairman of the Board of Directors. Mr.
Shearouse joined Fidelity Federal Bank and Trust in 1954 and has held various
positions in Fidelity Federal Bank and Trust. Mr. Shearouse became Chairman
3
of the Board of Fidelity Federal Bank and Trust in 1987 and was President of
Fidelity Federal Bank and Trust from 1974 to 1987. Mr. Shearouse has been a
director of Fidelity Federal Bank and Trust since 1961. Mr. Shearouse retired as
an active officer of Fidelity Federal Bank and Trust on January 31, 1995, but
has continued as Chairman of the Board.
Keith D. Beaty is the President and Chief Executive Officer of Implant
Innovations, Inc. a distributor of dental implants, located in West Palm Beach.
Mr. Beaty has been a director of Fidelity Federal Bank and Trust since 1992.
Paul C. Bremer is a retired certified public accountant. From 1979
until his retirement in 2000, Mr. Bremer was a partner with the accounting firm
of Ernst & Young. Mr. Bremer was appointed to the Board of Directors in August
2000.
F. Ted Brown, Jr. is the President of Ted Brown Real Estate, Inc.,
located in North Palm Beach. Mr. Brown has been a director of Fidelity Federal
Bank and Trust since 1990.
Donald E. Warren, M.D. is a retired physician who practiced in West
Palm Beach for over 36 years. He was associated with Intracoastal Health Systems
until his retirement in November 1996. Dr. Warren has been a director of
Fidelity Federal Bank and Trust since 1979.
Karl H. Watson is President of the Quarries, Cement and Construction
Division, CSR Rinker, a concrete and building materials company based in West
Palm Beach. Mr. Watson has been with CSR Rinker for over 35 years. Mr. Watson
was appointed to the Board of Directors on January 19, 1999.
Richard D. Aldred is Executive Vice President, Chief Financial Officer
and Treasurer.
Joseph C. Bova is Executive Vice President and Lending Operations
Manager.
Robert L. Fugate is Executive Vice President and Banking Operations
Manager.
Christopher H. Cook became Executive Vice President and corporate
counsel in 1996. Prior to that time, Mr. Cook was a partner with the law firm of
Brackett, Cook, Sned, Welch, D'Angio, Tucker & Farach, P.A.
Ownership Reports by Officers and Directors
The Common Stock is registered pursuant to Section 12(g) of the
Exchange Act. The officers and directors of the Company and beneficial owners of
greater than 10% of the Company's Common Stock ("10% beneficial owners") are
required to file reports on Forms 3, 4, and 5 with the SEC disclosing changes in
beneficial ownership of the Common Stock. SEC rules require disclosure in the
Company's Proxy Statement and Annual Report on Form 10-K of the failure of an
officer, director or 10% beneficial owner of the Company's Common Stock to file
a Form 3, 4 or 5 on a timely basis. No disclosure is required with respect to
the Company's Officers and Directors.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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The business of the Company's Board of Directors is conducted through
meetings and activities of the Board and its committees. During the year ended
December 31, 2000, the Board of Directors of the Company held 13 regular and
special meetings. During the year ended December 31, 2000, no director attended
fewer than 75 percent of the total meetings of the Board of Directors of the
Company and committees on which such director served.
The Company does not have a compensation committee. All cash
compensation paid to executive officers is paid by the Bank. The Executive
Compensation Committee of the Bank meets periodically to review the performance
of officers and employees and determine compensation programs and adjustments.
It is comprised of Directors Beaty, Bremer, Brown, Shearouse, Warren and Watson.
The Executive Compensation Committee met once during the year ended December 31,
2000.
4
The Board of Directors serves as the Nominating Committee. During the
year ended December 31, 2000, one meeting was held.
The Audit and Examination Committee of the Bank consists of Directors
Beaty, Bremer, Brown, Shearouse, Warren and Watson. This committee meets on a
quarterly basis with the internal auditor and the Bank's compliance officer to
review audit programs and the results of audits of specific areas as well as
other regulatory compliance issues. The Audit Committee also meets twice a year
with the Company's independent auditors. Each member of the Audit Committee is
"independent" as defined in the listing standards of the National Association of
Securities Dealers. The Company's Board of Directors has adopted a written
charter for the Audit Committee, which is attached to this proxy statement as
Exhibit A. The Audit Committee met four times during the year ended December 31,
2000.
Audit Fees
The aggregate fees billed by Deloitte & Touche, LLP, the member firms
of Deloitte & Touche Tohmatsu, and their respective affiliates (collectively,
"Deloitte") for professional services rendered for the audit of the Company's
annual financial statements for the fiscal year ended December 31, 2000 and for
the reviews of the financial statements included in the Company's Quarterly
Reports on Form 10-Q for that fiscal year were $155,000.
Financial Information Systems Design and Implementation Fees
Their were no aggregate fees billed by Deloitte for professional
services rendered for information technology services relating to financial
information systems design and implementation for the fiscal year ended December
31, 2000.
All Other Fees
The aggregate fees billed by Deloitte for services rendered to the
Company, other than the services described above under "Audit Fees" and
"Financial Information Systems Design and Implementation Fees", for the fiscal
year ended December 31, 2000 were $15,969.
The audit committee has considered whether the provision of non-audit
services is compatible with maintaining the principal accountant's independence.
Audit Committee Report
In accordance with rules recently established by the SEC, the Audit
Committee has prepared the following report for inclusion in this proxy
statement:
As part of its ongoing activities, the Audit Committee has:
o Reviewed and discussed with management the Company's audited
consolidated financial statements for the fiscal year ended
December 31, 2000;
o Discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61,
Communications with Audit Committees, as amended; and
o Received the written disclosures and the letter from the
independent auditors required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit
Committees, and has discussed with the independent auditors
their independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited consolidated
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000.
This report has been provided by the Audit Committee:
Directors Beaty, Bremer, Brown, Shearouse, Warren and Watson
5
Compensation Committee Interlocks and Insider Participation
The Company does not independently compensate its executive officers,
directors, or employees. The Executive Compensation Committee of the Bank
retains the principal responsibility for the compensation of the officers,
directors and employees of the Bank. The Executive Compensation Committee
consists of Directors Beaty, Bremer, Brown, Shearouse, Warren and Watson. The
Executive Compensation Committee reviews the benefits provided to the Bank's
officers and employees. During the year ended December 31, 2000 the Executive
Compensation Committee met once.
Report of the Executive Compensation Committee
Under rules established by the SEC, the Company is required to provide
certain data and information in regard to the compensation and benefits provided
to the Company's Chief Executive Officer and other executive officers of the
Company. The disclosure requirements for the Chief Executive Officer and other
executive officers include the use of tables and a report explaining the
rationale and considerations that led to fundamental executive compensation
decisions affecting those individuals. In fulfillment of this requirement, the
Executive Compensation Committee of the Bank, at the direction of the Board of
Directors has prepared the following report for inclusion in this proxy
statement.
The Executive Compensation Committee of the Bank is delegated the
responsibility of assuring that the compensation of the Chief Executive Officer
and other executive officers is consistent with the compensation strategy,
competitive practices, the performance of the Bank, and the requirements of
appropriate regulatory agencies. All non- employee directors sit on the
Executive Compensation Committee and participate in executive compensation
decision making. All cash compensation paid to executive officers is paid by the
Bank; the Company does not currently pay any cash compensation to executive
officers.
The primary goal of the Bank and its Executive Compensation Committee
is to provide an adequate level of compensation and benefits in order to attract
and retain key executives. Each officer is reviewed annually to determine his or
her contribution to the overall success of the institution.
Compensation for senior management is reviewed annually on a cycle that
coincides with the Bank's fiscal year end. In general, the purpose of the annual
compensation review is to ensure that the Bank's base salary levels are
competitive with financial institutions similar in size, geographic market and
business profile in order for the Bank to attract and retain persons of high
quality. In this regard the Executive Compensation Committee utilized nine
salary surveys, including the "Florida Bankers Salary Survey," "Savings and
Community Bankers Annual Salary Survey," the "Bank Administration Institute
Salary Survey" and the "SNL Executive Compensation Review." In addition, the
Executive Compensation Committee considers the overall profitability of the Bank
and the executive officer's contribution to the Bank when making its decision.
The Board of Directors approved a base salary for the Bank's Chief
Executive Officer of $340,000 for fiscal year 2001, which represented a 6.8%
increase from the level of base salary of $316,800 provided in fiscal 2000. The
2001 salary level was based upon level of performance and industry standards.
This report has been provided by the Executive Compensation Committee:
Directors Beaty, Bremer, Brown, Shearouse, Warren and Watson
6
Performance Graph
Set forth hereunder is a performance graph comparing (a) the total
return on the common stock of the Company and predecessor Bank for the period
beginning on January 1, 1996, through December 31, 2000, (b) the cumulative
total return on stocks included in the Nasdaq Composite Index over such period,
and (c) the yearly cumulative total return on stocks included in the Nasdaq Bank
Index over such period. The cumulative total return on the Bank's common stock
was computed assuming the reinvestment of cash dividends.
There can be no assurance that the Company's stock performance will
continue in the future with the same or similar trend depicted in the graph. The
Company will not make or endorse any predictions as to future stock performance.
Fidelity Bankshares Inc.
[GRAPHIC OMITTED]
Period Ending
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Index 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- --------------------------------------------------------------------------------
Fidelity
Bankshares Inc. 100.00 114.51 217.21 157.80 104.20 153.43
- --------------------------------------------------------------------------------
NASDAQ - Total US* 100.00 123.04 150.69 212.51 394.92 237.62
- --------------------------------------------------------------------------------
SNL $1B-$5B
Bank Index 100.00 129.63 216.19 215.69 198.23 224.95
- --------------------------------------------------------------------------------
MHC Thrifts 100.00 129.37 289.72 198.89 176.91 246.68
- --------------------------------------------------------------------------------
7
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EXECUTIVE COMPENSATION
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The following table sets forth the cash compensation paid for services
during the years ended December 31, 2000, 1999 and 1998 to Fidelity Bankshares,
Inc.'s Chief Executive Officer and Fidelity Bankshares, Inc.'s five most highly
compensated executive officers other than the Chief Executive Officer.
Summary Compensation Table
================================================================================
Annual Compensation
Other
Annual
Name and Year Ended Salary Bonus Compensation
Principal Position December 31, ($)(1) ($)(2) ($)(3)(4)
Vince A. Elhilow 2000 $316,800 $159,853 $ 39,707
President and Chief 1999 292,000 26,922 39,362
Executive Officer 1998 270,000 22,441 39,699
- ---------------------- --------------- ----------- ------------ ------------
J. Robert McDonald 2000 $152,000 $ 20,338 $ 13,598
Executive Vice 1999 143,500 13,230 14,717
President--Appraisal; 1998 133,500 11,096 14,148
President of FRAS
Richard D. Aldred 2000 $169,000 $ 49,597 $ 3,050
Executive Vice 1999 157,000 14,475 2,770
President--Finance 1998 145,000 12,052 2,676
Joseph C. Bova 2000 $165,000 $ 49,597 $ 11,938
Executive Vice 1999 150,000 13,830 11,878
President--Lending 1998 133,000 11,054 10,732
Operations
- ---------------------- --------------- ----------- ------------ ------------
Robert L. Fugate 2000 $162,000 $ 49,597 $ 6,314
Executive Vice 1999 147,000 13,553 6,039
President--Banking 1998 129,500 10,763 6,838
Operations Manager
- ---------------------- --------------- ----------- ------------ ------------
Christopher C. Cook 2000 $169,000 $ 49,597 $ 7,860
Executive Vice 1999 157,000 14,475 7,625
President 1998 145,000 12,052 15,481
Corporate Counsel
====================== =============== =========== ============ ============
================================================================================
Long-Term
Compensation Awards
Restricted
Stock Options/ All Other
Name and Year Ended Award(s) SARs Compensation
Principal Position December 31, ($) (#) Payouts ($)(5)
Vince A. Elhilow 2000 -- -- -- $ 45,022
President and Chief 1999 -- -- -- 134,994
Executive Officer 1998 -- -- -- 103,639
- --------------------- -------------- --------- --------- --------- ------------
J. Robert McDonald 2000 -- -- -- $ 27,671
Executive Vice 1999 -- -- -- 44,229
President--Appraisal; 1998 -- -- -- 60,970
President of FRAS
Richard D. Aldred 2000 -- -- -- $ 30,077
Executive Vice 1999 -- -- -- 41,374
President--Finance 1998 -- -- -- 48,441
Joseph C. Bova 2000 -- -- -- $ 29,318
Executive Vice 1999 -- -- -- 46,390
President--Lending 1998 -- -- -- 50,953
Operations
- --------------------- -------------- --------- --------- --------- ------------
Robert L. Fugate 2000 -- -- -- $ 28,581
Executive Vice 1999 -- -- -- 36,406
President--Banking 1998 -- -- -- 45,978
Operations Manager
- --------------------- -------------- --------- --------- --------- ------------
Christopher C. Cook 2000 -- -- -- $ 27,804
Executive Vice 1999 -- -- -- 21,515
President 1998 -- -- -- 15,075
Corporate Counsel
===================== ============== ========= ========= ========= ============
- --------------------------------
(1) Includes compensation deferred at the election of the named individual
under Fidelity Federal Bank and Trust's savings plan for employees,
Fidelity Federal Bank and Trust's flexible benefit plan and Fidelity
Federal Bank and Trust's long-term deferred compensation plan.
(2) Includes amounts deferred at the election of the executive under
Fidelity Federal Bank and Trust's management performance plan.
(3) Includes $26,400, $2,400 and $2,400 in Directors' fees for Fidelity
Federal Bank and Trust and its subsidiaries, payable to Messrs.
Elhilow, McDonald and Bova, respectively, in 2000.
(Footnotes continued on following page)
8
(4) Consists of automobile lease payments or automobile reimbursement
stipends and club dues for the named individual. The aggregate amount
of such benefits did not exceed the lesser of $50,000 or 10% of cash
compensation for the named individual.
(5) Includes amount allocated to executive officers under Fidelity Federal
Bank and Trust employee stock ownership plan, long-term deferred
compensation plan and matching contributions allocated under Fidelity
Federal Bank and Trust's savings plan for employees.
Employment and Severance Arrangements
Employment Agreement. Fidelity Federal Bank and Trust has entered into
an employment agreement with Vince A. Elhilow, President and Chief Executive
Officer of Fidelity Federal Bank and Trust. The employment agreement is
intended to ensure that Fidelity Federal Bank and Trust and Fidelity Bankshares,
Inc. will be able to maintain a stable and competent management. The continued
success of Fidelity Federal Bank and Trust and Fidelity Bankshares, Inc. depends
to a significant degree on the skill and competence of the President and Chief
Executive Officer.
The employment agreement provides for a three-year term for Mr.
Elhilow. Commencing on the first anniversary date and continuing each
anniversary date thereafter, the Board of Directors may extend the employment
agreement for an additional year such that the remaining term shall be three
years unless written notice of nonrenewal is given by the Board of Directors
after conducting a performance evaluation of the executive. The agreement
provides that the base salary of Mr. Elhilow will be reviewed annually.
Effective January 1, 2001, the current base salary of Mr. Elhilow is $340,000.
In addition to the base salary, the employment agreement provides that Mr.
Elhilow is to receive all benefits provided to permanent full-time employees of
Fidelity Federal Bank and Trust, including among other things, participation in
stock benefit plans and other fringe benefits applicable to executive personnel.
The employment agreement provides for termination by Fidelity Federal Bank and
Trust for cause at any time. In the event Fidelity Federal Bank and Trust
chooses to terminate his employment for reasons other than for cause, or upon
the termination of his employment for reasons other than a change in control, as
defined in the employment agreement, or in the event of his resignation from
Fidelity Federal Bank and Trust upon: (i) failure to re-elect him to his current
office; (ii) a material change in his functions, duties or responsibilities
which change would cause his position to become one of lesser responsibility,
importance or scope; (iii) relocation of his principal place of employment by
more than 30 miles; (iv) the liquidation or dissolution of Fidelity Federal Bank
and Trust; or (v) a breach of the agreement by Fidelity Federal Bank and Trust,
the executive, or in the event of death, his beneficiary, would be entitled to
receive an amount equal to the greater of the remaining payments, including base
salary, bonuses and other payments due under the remaining term of the
employment agreement or three times the average of the executive's base salary,
including bonuses and other cash compensation paid, and the amount of any
benefits received pursuant to any employee benefit plans maintained by Fidelity
Federal Bank and Trust.
If termination, whether voluntary or involuntary, follows a change in
control of Fidelity Federal Bank and Trust or Fidelity Bankshares, Inc., as
defined in the employment agreement, the executive or, in the event of death,
his beneficiary, would be entitled to a payment equal to the greater of (i) the
payments due under the remaining term of the employment agreement or (ii) 2.99
times his average annual compensation over the five years preceding termination.
Fidelity Federal Bank and Trust would also continue the executive's life,
health, and disability coverage for the remaining unexpired term of the
employment agreement to the extent allowed by the plan or policies maintained by
Fidelity Federal Bank and Trust from time to time.
The employment agreement provides that for a period of one year
following termination (other than in connection with a change in control), the
executive agrees not to compete with Fidelity Federal Bank and Trust in any
city, town or county in which Fidelity Federal Bank and Trust maintains an
office or has filed an application to establish an office.
Severance Plan. Fidelity Federal Bank and Trust has entered into
severance agreements (the "Severance Agreements") with Richard D. Aldred,
Executive Vice President, Joseph C. Bova, Executive Vice President, Robert L.
Fugate, Executive Vice President, and Christopher H. Cook, Esquire, Executive
Vice President/Corporate Counsel, providing for certain benefits in the event of
a change of control of Fidelity Federal Bank and Trust or Fidelity Bankshares,
Inc. Following a change of control of Fidelity Bankshares, Inc. or Fidelity
Federal Bank and Trust, as defined in the Severance Agreements, the officer
shall be entitled to a payment under a severance agreement if the
9
officer terminates employment following any demotion, loss of title, office or
significant authority, reduction in his annual compensation or benefits, or
relocation of his principal place of employment by more than 30 miles.
In the event that an officer is entitled to receive payments pursuant
to a severance agreement, he shall receive a cash payment up to a maximum of
three times such officer's annual compensation prior to termination of
employment, plus life and medical coverage for a period of up to 36 months from
the date of termination.
Directors' Compensation
The Chairman of the Board receives a monthly fee of $3,000 and each
director receives a monthly meeting fee of $2,000. Committee chairmen receive
fees of $425 for each meeting attended and committee members receive $300 for
each meeting attended. Fidelity Federal Bank and Trust paid a total of $209,375
in director and committee fees during the fiscal year ending December 31, 2000.
In addition, Fidelity Federal Bank and Trust has one chairman emeritus who
receives $1,200 monthly. One director emeritus does not receive any fee;
however, he receives $1,341 monthly under Fidelity Federal Bank and Trust's
Retirement Plan for directors. The directors emeriti meet informally with
members of Fidelity Federal Bank and Trust to discuss general matters affecting
Fidelity Federal Bank and Trust. Directors emeriti do not attend board meetings
and they have no authority to affect Board or management decisions. There are
currently three directors emeriti.
Retirement Plan for Directors. Fidelity Federal Bank and Trust
maintains a non-tax qualified Retirement Plan for Directors that provides
directors who serve on the Board for at least five years with an annual
retirement benefit equal to 80% of such directors' director fees for his or her
last full year of service on the Board. Eligible directors must have served on
the Board on or after January 1, 1990. Retirement benefits are payable monthly
over a period equal to the number of months (including partial months) that a
director has served on the Board. The directors' retirement plan provides for
survivor benefits payable to a designated beneficiary in an amount equal to the
director's regular benefit for a period of up to 180 months or the number of
months the director served on the Board, whichever is less. Survivor benefits
begin the day a deceased director would have reached age 65. Survivors are
entitled to receive the remaining payments due a director who dies after
retirement from the Board but before payment of all benefits under the
directors' retirement plan. During the year ended December 31, 2000, the cost to
Fidelity Federal Bank and Trust of the Director's Plan was $65,915.
Benefits
Defined Benefit Plan. Fidelity Federal Bank and Trust maintains a
noncontributory defined benefit plan. All employees age 21 or older who were
hired prior to January 1, 2001, and who have worked at Fidelity Federal Bank and
Trust for a period of one year and been credited with 1,000 or more hours of
employment with Fidelity Federal Bank and Trust during the year are eligible to
accrue benefits under the defined benefit plan. Fidelity Federal Bank and Trust
annually contributes an amount to the retirement plan necessary to satisfy the
actuarially determined minimum funding requirements in accordance with the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Employees
who are hired after December 31, 2000 will not be entitled to participate in the
defined benefit plan. Employees who are not eligible to participate in the
defined benefit plan will be entitled to an enhanced benefit in the Savings Plan
for Employees.
At the normal retirement age of 65 (or the fifth anniversary of plan
participation, if later), the plan is designed to provide a life annuity
guaranteed for ten years. The retirement benefit provided is an amount equal to
the sum of (1) and (2), where (1) is 1.46% of a participant's average monthly
compensation multiplied by the participant's credited service; and (2) is .44%
of average monthly compensation in excess of $1,417 multiplied by the
participant's credited service (not to exceed 35 years). Retirement benefits are
also payable upon retirement due to early and late retirement, disability or
death. A reduced benefit is payable upon early retirement at or after age 55 and
the completion of 15 years of service with Fidelity Federal Bank and Trust. Upon
termination of employment other than as specified above, a participant who was
employed by Fidelity Federal Bank and Trust for a minimum of five years is
eligible to receive his or her accrued benefit reduced for early retirement or a
deferred retirement benefit commencing on such participant's normal retirement
date. Benefits are payable in various annuity forms as well as in the form of a
single lump sum payment. At December 31, 2000, the market value of the
retirement plan trust fund equaled approximately $12.6 million. For the plan
year ended December 31, 2000, Fidelity Federal Bank and Trust made a
contribution to the retirement plan of $1,306,433.
10
The following table indicates the annual retirement benefit that would
be payable under the retirement plan upon retirement at age 65 in calendar year
2000, expressed in the form of a single life annuity for the final average
salary and benefit service classification specified below.
Years of Service and Benefits Payable at Retirement
Final Average
Compensation 15 20 25 30 35 40
------------ -- -- -- -- -- --
$ 25,000 $ 6,003 $ 8,004 $ 10,005 $ 12,006 $ 14,007 $ 15,832
$ 50,000 13,128 17,504 21,880 26,256 30,632 34,282
$ 75,000 20,253 27,004 33,755 40,506 47,257 52,732
$100,000 27,378 36,504 45,630 54,756 63,882 71,182
$150,000 41,628 55,504 69,380 83,256 97,132 104,596
The following table sets forth the years of credited service (i.e.,
benefit service) as of December 31, 2000, for each of the individuals named in
the cash compensation table.
Years of
Name Credited Service
Vince A. Elhilow............................................. 37.9
J. Robert McDonald........................................... 44.3
Richard D. Aldred............................................ 16.0
Joseph C. Bova............................................... 29.2
Robert L. Fugate............................................. 28.6
Christopher C. Cook.......................................... 4.9
Savings Plan for Employees. Fidelity Federal Bank and Trust maintains a
savings plan for employees which is a qualified, tax-exempt profit sharing plan
with a cash-or-deferred feature under Section 401(k) of the Internal Revenue
Code. All employees who have attained age 21 and have completed one year of
employment during which they worked at least 1,000 hours are eligible to
participate. Commencing April 1, 2001, new employees and employees not
previously eligible, other than certain excluded employees, will be eligible to
make salary deferral contributions on the first day of the month following their
90th day of employment. Peak-time employees will continue to be eligible to make
salary deferrals on the January 1 or July 1 after attainment of age 21 and
completion of 1,000 hours of service.
Funds included in the 401(k) plan are managed by an independent trustee who is
appointed by Fidelity Federal Bank and Trust's Board of Directors.
Under the 401(k) plan, participants are permitted to make salary
reduction contributions to the 401(k) plan equal to a percentage of up to 15% of
compensation. For these purposes, "compensation" includes total compensation
(including salary reduction contributions made under the 401(k) plan or the
flexible benefits plan sponsored by Fidelity Federal Bank and Trust), but does
not include compensation in excess of the Code section 401(a)(17) limits. The
participants' salary reduction contribution may be matched by Fidelity Federal
Bank and Trust, in its discretion, in the amount of $.50 per $1.00, up to a
maximum of 6% of the participants' salary. A participant is eligible for
matching contributions on the January 1 or July 1 after attainment of age 21 and
completion of one year of service in which they have 1,000 hours of service. All
employee contributions and earnings thereon are fully and immediately vested.
All employer matching contributions vest at the rate of 20% per year until a
participant is 100% vested after five years of service. Participants will also
vest in employer matching contributions upon the attainment of the normal
retirement age of 65 or later, death or disability, regardless of their years of
service. A participant may also withdraw salary reduction contributions in the
event the participant suffers a financial hardship.
Fidelity Federal Bank and Trust will amend the 401(k) plan to provide
that employees who are hired on or after January 1, 2001, will be entitled to
receive an employer discretionary contribution once they become eligible to
participate in the 401(k) plan. The employer discretionary contribution will be
provided in lieu of a benefit accrual
11
under the defined benefit plan, which has been closed to employees who are hired
after December 31, 2000. It is anticipated that eligible employees will be
entitled to an employer discretionary contribution equal to (i) 3% of eligible
compensation after the first year of eligibility; (ii) 4% after the 7th year of
eligibility ; and (iii) 5% after the 14th year of eligibility.
The 401(k) plan permits employees to direct the investment of their own
accounts into various investment options, including our common stock. In
connection with the stock offering, participants will be permitted to direct the
investment of all or a portion of their account towards purchases of Fidelity
Bankshares, Inc. common stock in the offering.
Plan benefits will be paid to each participant in either a lump sum or
installments over a period of up to 20 years, at the participant's election.
Upon distribution of a participant's account, the participant will have the
choice of having his account paid to him in common stock (to the extent invested
therein) or in cash. At December 31, 2000, the market value of the 401(k) plan
trust fund equaled approximately $10.2 million. The contribution to the 401(k)
plan for the plan year ended December 31, 2000, was $409,063. During the year
ended December 31, 2000, Fidelity Federal Bank and Trust contributed $4,800,
$4,380, $4,800, $4,530, $4,416 and $4,800 to the accounts of Messrs. Elhilow,
McDonald, Aldred, Bova, Fugate and Cook, respectively.
Supplemental Executive Retirement Plan. Fidelity Federal Bank and Trust
maintains a non-qualified supplemental executive retirement plan for certain
executives of Fidelity Federal Bank and Trust to compensate those executive
participants in Fidelity Federal Bank and Trust's retirement plan whose benefits
are limited by Section 415 or Section 401(a)(17) of the Internal Revenue Code.
As of December 31, 2000, there were 15 executive employees participating in the
supplemental executive retirement plan. The supplemental executive retirement
plan provides the designated executive employees with retirement benefits
generally equal to 80% of compensation (the "target percentage") reduced by the
employee's accrued benefit under Fidelity Federal Bank and Trust's retirement
plan and 50% of the social security benefits. Benefits under the supplemental
executive retirement plan vest over a period ending on normal retirement age
which is age 65 or age 60 with 30 years of service. Participants may increase
their target percentage by 2% of compensation for each year of service beyond
normal retirement age; however, a participant's target percentage may not exceed
100%. Participants may elect to have benefits paid as a single life annuity with
guaranteed 10-year term or as a joint and 100% or joint and 50% survivor
annuity. Benefits for participants who retire before normal retirement age are
reduced 5% per year for each year under normal retirement age.
Pre-retirement survivor benefits are provided for designated
beneficiaries of participants who do not survive until retirement in an amount
equal to the lump sum actuarial equivalent of the participant's accrued benefit
under the Plan. Pre-retirement benefits are payable in 120 equal monthly
installments.
The supplemental executive retirement plan is considered an unfunded
plan for tax and ERISA purposes. All obligations arising under the supplemental
executive retirement plan are payable from the general assets of Fidelity
Federal Bank and Trust; however, Fidelity Federal Bank and Trust has set up a
trust to ensure that sufficient assets will be available to pay the benefits
under the supplemental executive retirement plan.
The benefits paid under the supplemental executive retirement plan
supplement the benefits paid by the retirement plan. Fidelity Federal Bank and
Trust is unable to project the actual amounts to be paid to each participant
under the supplemental executive retirement plan. The following table indicates
the expected aggregate annual retirement benefit payable from the retirement
plan, supplemental executive retirement plan and 50% of estimated social
security benefits to supplemental executive retirement plan participants,
expressed in the form of a single life annuity for the final average salary and
benefit service classification specified below.
12
Years of Service and Benefit Payable at Retirement
Final Average
Compensation 25 30 35 40
------------ -- -- -- --
$100,000 $ 80,000 $ 80,000 $ 80,000 $ 80,000
$125,000 100,000 100,000 100,000 100,000
$150,000 120,000 120,000 120,000 120,000
$175,000 140,000 140,000 140,000 140,000
$200,000 160,000 160,000 160,000 160,000
$225,000 180,000 180,000 180,000 180,000
$250,000 200,000 200,000 200,000 200,000
$275,000 220,000 220,000 220,000 220,000
$300,000 240,000 240,000 240,000 240,000
Messrs. Elhilow, McDonald, Aldred, Bova, Fugate and Cook have 37.9,
44.3, 16.0, 29.2, 28.6 and 4.9 years, respectively, of credited service under
the supplemental executive retirement plan as of December 31, 2000. Mr. Aldred's
normal retirement age under the supplemental executive retirement plan is 60.
Mr. Cook's normal retirement age under the supplemental executive retirement
plan is 62. Fidelity Federal Bank and Trust's cost attributable to the
supplemental executive retirement plan was $1,481,987 for the year ended
December 31, 2000.
Long-Term Deferred Compensation Plan. Fidelity Federal Bank and Trust
maintains a long-term deferred compensation plan for selected officers
designated by the Board of Directors. As of December 31, 2000, the Board has
designated 15 executives to participate in the long-term deferred compensation
plan, including Messrs. Elhilow, McDonald, Aldred, Bova, Fugate and Cook. The
long-term deferred compensation plan provides the designated executives with the
option of deferring any percentage of compensation until retirement. In addition
to participant deferrals, Fidelity Federal Bank and Trust may contribute
annually an amount equal to 10% of each participant's compensation. For these
purposes, "compensation" includes salary payable during the calendar year,
before reduction for amounts deferred under this Plan or any other salary
reduction plan, but does not include bonuses, expense reimbursements, or
non-cash compensation. Participant and bank contributions are credited to a
separate account which earns "interest" at an annual rate equal to Moody's
corporate bond index plus 3%. Participants are at all times 100% vested in
participant deferrals but vest in Fidelity Federal Bank and Trust's
contributions over a period of years ending on each participant's normal
retirement age of 65 (or age 60 with 30 years of service). Benefits are paid,
beginning no later than 60 days following termination of employment with
Fidelity Federal Bank and Trust, either as a lump sum or, at the participant's
election made at the time of deferral, over a period of 60, 120 or 180 months.
Participants may alternatively elect to withdraw participant deferrals prior to
their normal retirement date, but no less than seven years following the end of
the deferral period in which the participant initially elected the early
withdrawal option. Early withdrawals are available from participant deferrals
only and may not be made from bank contributions or "interest" credited to a
participant's account. Although segregated "accounts" are set up for
participants, all amounts credited to a participant's account remain subject to
the claims of Fidelity Federal Bank and Trust's general creditors. For the year
ended December 31, 2000, Fidelity Federal Bank and Trust vested and funded
$31,680, $15,200, $16,900, $16,500, $16,200 and $16,900 to the account balances
of Messrs. Elhilow, McDonald, Aldred, Bova, Fugate and Cook, respectively.
Senior Management Performance Incentive Award Program. Fidelity Federal
Bank and Trust maintains a senior management performance incentive award program
to reward selected members of senior management (i.e., senior officers, vice
presidents and above) for their services which contributed to Fidelity Federal
Bank and Trust's success during the year. The senior management performance
award program has two elements: a bonus program for
13
senior management and a non-qualified deferred compensation plan available only
to certain members of senior management that are eligible for an award. Under
the senior management performance incentive award program, Fidelity Federal Bank
and Trust annually sets aside a varying percentage of net profits and allocates
such sums to key management employees in accordance with criteria annually
determined by the plan committee. The awards are paid after the end of the
calendar year to which they relate. Participants who are eligible elect either
immediate receipt of annual awards or deferral of such awards in a non-qualified
deferred compensation plan for a designated period of years, or until
retirement. Amounts allocated to participants under the non-qualified deferred
compensation plan will be invested among ten investment funds, including an
Employer Stock Fund. Participants in the non-qualified plan are entitled to
direct the investment of amounts allocated to their accounts towards the
purchase of common stock in the offering. A participant's benefit under the plan
will equal the value of the benefit booked to the participant's account. At the
time of distribution, deferred amounts will be received in a lump sum or in
installments.
Supplemental Survivor Benefit Plan. Fidelity Federal Bank and Trust
maintains a Supplemental Survivor Benefit Plan that provides selected bank
officers with life insurance in an amount initially equal to three times such
officer's annual compensation. For these purposes, "officer" means any
individual who has achieved the rank of corporate secretary, vice president or
higher. Fidelity Federal Bank and Trust is the owner and beneficiary of the life
insurance policies; however, each participant is permitted to designate a
beneficiary or beneficiaries to whom benefits under the plan would be paid by
Fidelity Federal Bank and Trust in the event of such officer's death. If a
participant does not designate a beneficiary, Fidelity Federal Bank and Trust
will pay the participant's benefits to his or her spouse, children, or estate.
The plan is intended to qualify as a "top-hat" plan exempt from the
participation, vesting, funding and fiduciary requirements of Title I of ERISA.
Supplemental Disability Income. Fidelity Federal Bank and Trust also
has purchased long-term disability income insurance policies for the benefit of
Messrs. Elhilow, McDonald, Aldred, Bova, Fugate and Cook to provide disability
income in an amount equal to the lesser of $10,000 per month or 60% of such
participant's basic monthly salary less disability income payable from other
sources. Benefits are payable for periods of up to 60 months for participants
who become disabled prior to age 60 and for progressively shorter periods for
participants who become disabled after attaining age 60.
Employee Stock Ownership Plan and Trust. Fidelity Federal Bank and
Trust maintains an employee stock ownership plan and related trust for eligible
employees. The employee stock ownership plan is a tax-qualified plan subject to
the requirements of ERISA and the Code. Employees with a 12-month period of
employment with Fidelity Federal Bank and Trust during which they worked at
least 1,000 hours and who have attained age 21 are eligible to participate
(employees who satisfy these requirements after 6 months of employment will be
entitled to participate earlier). The employee stock ownership plan was
originally funded from borrowings from an unrelated third-party lender to
purchase 193,200 shares of common stock, which shares serve as collateral for
the loan. On June 30, 1997, the loan was purchased and is now held by Fidelity
Bankshares, Inc. The loan is being repaid principally from Fidelity Federal Bank
and Trust's contributions to the employee stock ownership plan. Shares purchased
by the employee stock ownership plan are held in a suspense account for
allocation among participants as the loan is repaid.
Contributions to the employee stock ownership plan and shares released
from the suspense account in an amount proportional to the repayment of the
employee stock ownership plan loan are allocated among participants on the basis
of compensation in the year of allocation, up to an annual adjusted maximum
level of compensation. Benefits generally become 100% vested after five years of
credited service. Forfeitures are reallocated among remaining participating
employees in the same proportion as contributions. Benefits may be payable upon
death, retirement, early retirement, disability or separation from service.
Fidelity Federal Bank and Trust's contributions to the employee stock ownership
plan are not fixed, so benefits payable under the employee stock ownership plan
cannot be estimated.
The Board of Directors established a committee consisting of all of the
non-employee directors of Fidelity Federal Bank and Trust to administer the
employee stock ownership plan, and has appointed an unrelated corporate trustee
for the employee stock ownership plan. The Benefits Committee may instruct the
trustee regarding investment of funds contributed to the employee stock
ownership plan. The employee stock ownership plan trustee will generally vote
all shares of common stock held under the employee stock ownership plan in
accordance with the written instructions of the employee stock ownership plan
committee. In certain circumstances, however, the trustee must vote all
allocated shares held in the employee stock ownership plan in accordance with
the instructions of the participating employees, and unallocated shares and
shares held in the suspense account in a manner calculated to most accurately
14
reflect the instructions the employee stock ownership plan trustee has received
from participants regarding the allocated stock, subject to and in accordance
with the fiduciary duties under ERISA owed by the trustee for the plan to the
employee stock ownership plan participants. Under ERISA, the Secretary of Labor
is authorized to bring an action against the plan trustee for the failure of the
trustee to comply with its fiduciary responsibilities. Such a suit could seek to
enjoin the trustee from violating its fiduciary responsibilities and could
result in the imposition of civil penalties or criminal penalties if the breach
is found to be willful.
In connection with the stock offering, the employee stock ownership
plan intends to obtain a loan from Fidelity Bankshares, Inc. in order to
purchase up to 6% of the shares issued in the stock offering. It is anticipated
that the loan will be repaid over a period of up to 10 years.
Stock Option Plan. Options to purchase 227,700 shares of common stock
were granted on January 7, 1994, pursuant to the Fidelity Federal Savings Bank
of Florida 1994 Incentive Stock Option Plan. The options (with limited rights)
provide for an exercise price of $9.09 per share (adjusted for a 10% stock
dividend distributed November 30, 1995). Set forth below is information relative
to options granted under the 1994 Incentive Stock Option Plan to named executive
officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
==========================================================================================================================
Number of Securities
Shares Underlying Value of Unexercised
Name Acquired Value Unexercised In-The-Money
Upon Realized (1) Options at Options at Fiscal
Exercise Fiscal Year-End Year-End (2)
Exercisable/ Exercisable/
Unexercisable Unexercisable
Vince A. Elhilow 7,500 $79,950 12,500/0 $131,688/0
- ---------------------------
J. Robert McDonald 0 0 0/0 0/0
Richard D. Aldred 0 0 6,724/0 $70,837/0
Joseph C. Bova 600 $3,696 9,055/0 $95,394/0
Robert L. Fugate 0 0 4,862/0 $51,221/0
- --------------------------- ----------------- ---------------- --------------------------- ---------------------------
Christopher C. Cook 1,000 $4,910 1,996/0 $21,028/0
=========================== ================= ================ =========================== ===========================
<FN>
(1) Equals the difference between the aggregate exercise price of the options
exercised and the aggregate fair market value of the shares of common stock
received upon exercise computed using the price of the common stock as
quoted on the Nasdaq National Market at the time of exercise.
(2) Equals the difference between the aggregate exercise price of such options
and the aggregate fair market value of the shares of common stock that
would be received upon exercise, assuming such exercise occurred on
December 31, 2000, at which date the closing price of the common stock as
quoted on the Nasdaq National Market was at $19.625.
</FN>
Stock Option Plan for Outside Directors. Options to purchase 75,900
shares of common stock were granted to outside directors on January 7, 1994
under the Fidelity Federal Savings Bank of Florida 1994 Stock Option Plan for
Outside Directors.
The options provide for an exercise $9.09 per share which was equal to
the fair market value of the common stock on the date of grant. All options
granted under the directors' stock option plan expire upon the earlier of ten
years from the date of grant or one year following the date the optionee ceases
to be a director. Options for 15,180 shares of
15
common stock have been awarded to each of Directors Warren, Brown, and Beaty.
The directors' stock option plan further provides that each new director shall
be granted options to purchase 100 shares of common stock to the extent options
remain available in, or are returned to, the directors' stock option plan.
Presently, there are no options reserved for future grant.
Awards under the stock recognition plan would be nontransferable and
nonassignable. Under OTS rules, if the stock recognition plan is adopted within
one year following the conversion, the shares which are subject to an award
would vest at a rate of 20% at the end of each full 12 months of service with
Fidelity Federal Bank and Trust after the date of grant of the award. Awards
would be adjusted for capital changes such as stock dividends and stock splits.
Awards would be 100% vested upon termination of employment or service due to
death or disability, and if the stock recognition plan is adopted more than one
year after the conversion, awards would be 100% vested upon normal retirement or
a change in control of Fidelity Federal Bank and Trust or Fidelity Bankshares,
Inc. If employment or service were to terminate for other reasons, the award
recipient would forfeit any nonvested award. If employment or service is
terminated for cause (as defined), shares not already delivered would be
forfeited. Under OTS rules, if the stock recognition plan is adopted within one
year of the conversion, no individual officer may receive more than 25% of the
awards under the plan, no non-employee director may receive more than 5% of the
awards under the plan, and all non-employee directors as a group may receive no
more than 30% of the awards under the plan in the aggregate.
The recipient of an award will recognize income equal to the fair
market value of the stock earned, determined as of the date of vesting, unless
the recipient makes an election under ss. 83(b) of the Code to be taxed earlier.
The amount of income recognized by the recipient would be a deductible expense
for tax purposes for Fidelity Bankshares, Inc. If the stock recognition plan is
adopted within one year following the conversion, dividends and other earnings
will accrue and be payable to the award recipient when the shares vest. If the
stock recognition plan is adopted within one year following the conversion,
shares not yet vested will be voted by the trustee of the stock recognition
plan, taking into account the best interests of the award recipients. If the
stock recognition plan is adopted more than one year following the conversion,
dividends declared on unvested shares will be distributed to the recipient when
paid, and the recipient will be entitled to vote the unvested shares.
- --------------------------------------------------------------------------------
TRANSACTIONS WITH CERTAIN RELATED PERSONS
- --------------------------------------------------------------------------------
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") requires that all loans or extensions of credit to executive officers
and directors must be made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with the general public and must not involve more than the normal
risk of repayment or present other unfavorable features. In addition, loans made
to a director or executive officer in excess of the greater of $25,000 or 5% of
the Bank's capital and surplus (up to a maximum of $500,000) must be approved in
advance by a majority of the disinterested members of the Board of Directors.
Prior to the enactment of FIRREA, the Bank provided loans to Directors and
executive officers at reduced rates and/or with points waived or reduced.
Subsequent to the enactment of FIRREA, loans made to officers, directors, and
executive officers are made in the ordinary course of business on the same terms
and conditions as the Bank would make to any other customer in the ordinary
course of business and do not involve more than a normal risk of collectibility
or present other unfavorable features.
The Bank intends that all transactions between the Bank and its
executive officers, directors, holders of 10% or more of the shares of any class
of its common stock and affiliates thereof, will contain terms no less favorable
to the Bank than could have been obtained by it in arm's-length negotiations
with unaffiliated persons and will be approved by a majority of independent
outside directors of the Bank not having any interest in the transaction. During
the year ended December 31, 2000, the Bank had no loans outstanding to directors
or executive officers which were made on preferential terms.
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PROPOSAL II--RATIFICATION OF APPOINTMENT OF AUDITORS
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The Board of Directors of the Company has approved the engagement of
Deloitte & Touche LLP to be the Company's auditors for the 2001 fiscal year,
subject to the ratification of the engagement by the Company's stockholders. At
the Meeting, stockholders will consider and vote on the ratification of the
engagement of Deloitte & Touche LLP for the Company's fiscal year ending
December 31, 2001. A representative of Deloitte & Touche LLP is expected to
attend the Meeting to respond to appropriate questions and to make a statement
if he so desires.
16
In order to ratify the selection of Deloitte & Touche LLP as the
auditors for the 2001 fiscal year, the proposal must receive at least a majority
of the votes cast, either in person or by proxy, in favor of such ratification.
The Board of Directors recommends a vote "FOR" the ratification of Deloitte &
Touche LLP as auditors for the 2001 fiscal year.
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STOCKHOLDER PROPOSALS
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In order to be eligible for inclusion in the Company's proxy materials
for next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's executive office, 218
Datura Street, West Palm Beach, Florida 33401, no later than November 22, 2001.
Any such proposals shall be subject to the requirements of the proxy rules
adopted under the Exchange Act.
The Bylaws of the Company provide an advance notice procedure for
certain business, or nominations to the Board of Directors, to be brought before
an annual meeting. In order for a stockholder to properly bring business before
an annual meeting, or to propose a nominee to the Board, the stockholder must
give written notice to the Secretary of the Company not less than ninety (90)
days before the date fixed for such meeting; provided, however, that in the
event that less than one hundred (100) days notice or prior public disclosure of
the date of the meeting is given or made, notice by the stockholder to be timely
must be received no later than the close of business on the tenth day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure was made. The notice must include the stockholder's name,
record address, and number of shares owned by the stockholder, describe briefly
the proposed business, the reasons for bringing the business before the annual
meeting, and any material interest of the stockholder in the proposed business.
In the case of nominations to the Board, certain information regarding the
nominee must be provided. Nothing in the paragraph shall be deemed to require
the Company to include in its proxy statement and proxy relating to an annual
meeting any stockholder proposal which does not meet all of the requirements or
inclusion established by the SEC in effect at the time such proposal is
received.
The date on which the Annual Meeting of Stockholders is expected to be
held is April 16, 2002. Accordingly, advance written notice of business or
nominations to the Board of Directors to be brought before the 2001 Annual
Meeting of Stockholders must be given to the Company no later than January 16,
2002.
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MISCELLANEOUS
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The Board of Directors is not aware of any business to come before the
Meeting other than the matters described above in the Proxy Statement. However,
if any matters should properly come before the Meeting, it is intended that
holders of the proxies will act as directed by a majority of the Board of
Directors, except for matters related to the conduct of the Meeting, as to which
they shall act in accordance with their best judgment.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Bank may solicit proxies
personally or by telegraph or telephone without additional compensation.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 will be furnished without charge to stockholders as of
the record date upon written request to the Corporate Secretary, Fidelity
Bankshares, Inc., 205 Datura Street, West Palm Beach, Florida 33401.
BY ORDER OF THE BOARD OF DIRECTORS
Elizabeth M. Cook
------------------
West Palm Beach, Florida
March 23, 2001
17
REVOCABLE PROXY
FIDELITY BANKSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
April 17, 2001
The undersigned hereby appoints the full Board of Directors, with full
powers of substitution to act as attorneys and proxies for the undersigned to
vote all shares of Common Stock of the Company which the undersigned is entitled
to vote at a Annual Meeting of Stockholders ("Meeting") to be held at the Crowne
Plaza Hotel, 1601 Belvedere Road, West Palm Beach, Florida, at 10:00 a.m. (local
time) on April 17, 2001. The official proxy committee is authorized to cast all
votes to which the undersigned is entitled as follows:
VOTE
FOR WITHHELD
1. The election as directors of all nominees --- --------
listed below (except as marked to the _ _
contrary below) |_| |_|
Paul C. Bremer
F. Ted Brown, Jr.
Karl H. Watson
INSTRUCTION: To withhold your vote for
one or more nominees, write the name of
the nominee(s) on the lines below.
---------------------------------------
---------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
_ _ _
2. The ratification of the appointment of |_| |_| |_|
Deloitte & Touche LLP as auditors for the
fiscal year ending December 31, 2001.
The Board of Directors recommends a vote "FOR" each of the listed proposals.
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THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE
ABOVE-NAMED PROXIES AT THE DIRECTION OF A MAJORITY OF THE BOARD OF DIRECTORS. AT
THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or
at any adjournment thereof and after notification to the Secretary of the
Company at the Meeting of the stockholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. This proxy may also be revoked by sending written
notice to the Secretary of the Company at the address set forth on the Notice of
Annual Meeting of Stockholders, or by the filing of a later proxy statement
prior to a vote being taken on a particular proposal at the Meeting.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of the Meeting and a proxy statement dated
March 23, 2001.
_
Dated: _________________, 2001 |_| Check Box if You Plan
to Attend Meeting
- ------------------------------- ----------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- ------------------------------- ----------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder should sign.
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Please complete and date this proxy and return it promptly
in the enclosed postage-prepaid envelope.
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