March 21, 2003
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 22, 2003.
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 two directors and to ratify the appointment of Deloitte &
Touche LLP as auditors for the year ending December 31, 2003.
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
Chairman of the Board
and Chief Executive Officer
Fidelity Bankshares, Inc.
205 Datura Street
West Palm Beach, Florida 33401
(561) 803-9900
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On April 22, 2003
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 22, 2003.
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 two directors of the Company;
2. The ratification of the appointment of Deloitte & Touche LLP as auditors
for the Company for the fiscal year ending December 31, 2003; 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 7, 2003 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
/s/ Elizabeth M. Cook
----------------------
Elizabeth M. Cook
Secretary
West Palm Beach, Florida
March 21, 2003
- --------------------------------------------------------------------------------
IMPORTANT: A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
2
PROXY STATEMENT
of
FIDELITY BANKSHARES, INC.
205 Datura Street
West Palm Beach, Florida 33401
(561) 803-9900
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
April 22, 2003
- --------------------------------------------------------------------------------
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 22, 2003 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 21, 2003.
- --------------------------------------------------------------------------------
REVOCATION OF PROXIES
- --------------------------------------------------------------------------------
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, by delivering a later dated proxy or by attending the Meeting and voting
in person. 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. However, if you are a stockholder
whose shares are not registered in your own name, you will need appropriate
documentation from your record holder to vote personally at the Meeting.
- --------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
- --------------------------------------------------------------------------------
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 7, 2003 (the "Record
Date") are entitled to one vote for each share then held. As of the Record Date,
the Company had 15,902,916 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.
Directors are elected by a plurality of the votes cast, without regard to either
broker non-votes or proxies as to which the authority to vote for the nominees
being proposed is withheld. The ratification of Deloitte & Touche LLP must be
approved by a majority of the votes cast in person or by proxy at the Meeting
without regard to broker non-votes or proxies marked "abstain."
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 directors and
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
business address of each director and executive officer is 205 Datura Street,
West Palm Beach, Florida.
3
<page>
Number of Shares of
Common Stock Beneficially Percent of All Common
Name of Beneficial Owner Owned(1) Stock Outstanding(1)
Vince A. Elhilow(2) 416,228 2.80%
Keith D. Beaty(3) 154,900 1.04
Paul C. Bremer(4) 28,909 0.19
F. Ted Brown, Jr.(5) 94,775 0.64
Donald E. Warren, M.D.(6) 98,560 0.66
Karl H. Watson(7) 28,534 0.19
Richard D. Aldred(8) 140,049 0.94
J. Robert McDonald(9) 155,100 1.04
Joseph C. Bova(10) 114,134 0.77
Robert L. Fugate(11) 146,621 0.99
Christopher H. Cook(12) 53,595 0.36
Private Capital Management(14) 1,499,608 10.09
Fidelity Federal Bank & Trust ESOP(15) 994,075 6.69
Savings Plan for Fidelity Federal Savings (15) 699,342 4.71
All directors and executive
Officers as a group.(13) 1,431,405 9.62%
- ---------------------
(1) Based upon 14,858,327 shares outstanding.
(2) Includes 8,000 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 69,619 shares held by the management performance plan. Includes 13,305
shares allocated under the Fidelity Federal Bank &Trust employee stock
ownership plan. Includes 32,058 shares held under the savings plan for
employees for the benefit of Mr. Elhilow. Includes 69,000 shares of
restricted stock and options to purchase 21,500 shares pursuant to the 2002
Incentive Stock Benefit Plan.
(3) Includes 36,682 shares subject to options that may be exercised within 60
days pursuant to the directors' stock option plan. Includes 17,390 shares
of restricted stock and options to purchase 7,233 shares pursuant to the
2002 Incentive Stock Benefit Plan.
(4) Includes 12,000 shares of restricted stock and options to purchase 7,233
shares pursuant to the 2002 Incentive Stock Benefit Plan.
(5) Includes 9,332 shares subject to options that may be exercised within 60
days pursuant to the directors' stock option plan. Includes 17,390 shares
of restricted stock and options to purchase 7,233 shares pursuant to the
2002 Incentive Stock Benefit Plan.
(6) Includes 31,000 shares subject to options that may be exercised within 60
days pursuant to the directors' stock option plan. Includes 17,390 shares
of restricted stock and options to purchase 7,233 shares pursuant to the
2002 Incentive Stock Benefit Plan.
(7) Includes 14,000 shares of restricted stock and options to purchase 7,233
shares pursuant to the 2002 Incentive Stock Benefit Plan.
(8) Includes 11,000 shares of common stock subject to options pursuant to the
stock option plan and 18,000 shares held by the management performance
plan. Includes 12,698 shares allocated under the Fidelity Federal Bank &
Trust employee stock ownership plan. Includes 10,554 shares held under the
savings plan for employees for the benefit of Mr. Aldred. Includes 30,000
shares of restricted stock and options to purchase 8,167 shares pursuant
to the 2002 Incentive Stock Benefit Plan.
(9) Includes 44,084 shares held by the management performance plan. Includes
11,123 shares allocated under the Fidelity Federal Bank & Trust employee
stock ownership plan. Includes 21,972 shares held under the savings plan
for employees for the benefit of Mr. McDonald. Includes 12,000 shares of
restricted stock and options to purchase 20,000 shares pursuant to the 2002
Incentive Stock Benefit Plan.
(10) Includes 8,381 shares of common stock subject to options pursuant to the
stock option plan and 12,877 shares held by the management performance
plan. Includes 12,372 shares allocated under the Fidelity Federal Bank &
Trust employee stock ownership plan. Includes 20,189 shares held under the
savings plan for employees for the benefit of Mr. Bova. Includes 30,000
shares of restricted stock and options to purchase 8,167 shares pursuant
to the 2002 Incentive Stock Benefit Plan.
(11) Includes 18,895 shares held by the management performance plan. Includes
11,192 shares allocated under the Fidelity Federal Bank & Trust employee
stock ownership plan. Includes 31,823 shares held under the savings plan
for employees for the benefit of Mr. Fugate. Includes 30,000 shares of
restricted stock and options to purchase 8,167 shares pursuant to the
2002 Incentive Stock Benefit Plan.
(12) Includes 4,823 shares subject to options that may be exercised pursuant to
the directors' plan. Includes 4,323 shares allocated under the Fidelity
Federal Bank & Trust employee stock ownership plan. Includes 30,000 shares
of restricted stock and options to purchase 8,167 shares pursuant to
the 2002 Incentive Stock Benefit Plan.
4
<page>
(13) 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 96,614 shares of common stock
which non-employee 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 & Trust stock option
plan for non-employee directors.
(14) This information is based upon a Schedule 13G filed by the reporting
person. The reporting person reports shared voting and investment power
over all shares reported. The reporting person's address is 8889 Pelican
Bay Boulevard, Naples, Florida 34108.
(15) Excluding shares held by officers.
- --------------------------------------------------------------------------------
PROPOSAL I--ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Company's Board of Directors currently is composed of six members. The
Company's bylaws provide that 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 duly qualified. 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.
Two directors will be elected at the Meeting. The Board of Directors has
nominated Vince A. Elhilow and Donald E. Warren, M.D. each to serve on the Board
of Directors 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 savings
association 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
nominee identified below. If the 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 the nominees might be unable to serve, if
elected. Except as indicated herein, there are no arrangements or understandings
between the nominees and any other person pursuant to which such nominee was
selected.
Current Term to
Name Age Positions Held Director Since (1) Expire
NOMINEE
Vince A. Elhilow 63 Chairman of the Board, 1984 2003
Chief Executive Officer
and President
Donald E. Warren, M.D. 75 Director 1979 2003
DIRECTORS CONTINUING IN OFFICE
Paul C. Bremer 59 Director 2000 2004
F. Ted Brown 74 Director 1990 2004
Karl H. Watson 61 Director 1999 2004
Keith D. Beaty 53 Director 1992 2005
- ---------------------
(1) Where appropriate refers to the individual's service as a director of
Fidelity Federal Bank & Trust's mutual predecessor.
5
<page>
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 & Trust since
1987, Chief Executive Officer of Fidelity Federal Bank & Trust since 1992 and
Chairman of the Board since 2002. Prior to his appointment as President of
Fidelity Federal Bank & Trust, Mr. Elhilow was manager of the Loan Department
from 1973 to 1992 and Executive Vice President and Chief Operating Officer from
1981 to 1987. Mr. Elhilow joined Fidelity Federal Bank & Trust in January 1963
and has been a Director since 1984.
Keith D. Beaty is the Chief Executive Officer of Implant Innovations, Inc.
a distributor of dental implants, located in Palm Beach Gardens. Mr. Beaty has
been a director of Fidelity Federal Bank & 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 is the President of Ted Brown Real Estate, Inc., located in
North Palm Beach. Mr. Brown has been a director of Fidelity Federal Bank & 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 & Trust since 1979.
Karl H. Watson is President of the Construction Materials Division, Rinker
Materials, a concrete and building materials company based in West Palm Beach.
Mr. Watson has been with Rinker Materials 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. All of the Company's directors, officers and all
owners of more than 10% of the Company's common stock filed these reports on a
timely basis.
6
<page>
- --------------------------------------------------------------------------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
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, 2002, the Board of Directors of the Company held 13 regular and
special meetings. During the year ended December 31, 2002, 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 to determine compensation programs and adjustments. During
2002 the Executive Compensation Committee was comprised of Directors Beaty,
Bremer, Shearouse, Warren and Watson. The Executive Compensation Committee met
one time during the year ended December 31, 2002.
The Board of Directors serves as the Nominating Committee. During the year
ended December 31, 2002, one meeting was held.
During 2002 the Audit and Examination Committee of the Company consisted of
Directors Beaty, Bremer, 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 Board of Directors have adopted a written charter for
the Audit Committee. The Audit Committee met five times during the year ended
December 31, 2002.
Audit and Examination 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, 2002;
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;
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; and
o Considered the compatibility of non-audit services described
above with maintaining auditor 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, 2002.
This report has been provided by the
Audit Committee:
Keith D. Beaty, Paul C. Bremer, Donald E. Warren, M.D. and Karl H. Watson
7
<page>
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, 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, 2002 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. The performance of each officer is reviewed annually to
determine his or her contribution to the overall success of the institution.
Compensation of 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 six
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 $390,000 for fiscal year 2003, which represented a 5.98%
increase from the Chief Executive Officer's base salary of $368,000 in fiscal
2002. The 2003 base salary was based upon the Chief Executive Officer's
performance and industry standards.
This report has been provided by the Executive
Compensation Committee:
Directors Beaty, Bremer, Shearouse, Warren and Watson
8
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, 1998, through December 31, 2002, (b) the cumulative total return
on stocks included in the S&P 500 Index over such period, (c) the cumulative
total return on stocks included in the Nasdaq Composite Index over such period,
and (d) the cumulative total return on stocks included in the Nasdaq Bank Index
over such period. The cumulative total return on the Company's common stock was
computed assuming the reinvestment of cash dividends.
Assuming an initial investment in the common stock of Fidelity Bankshares,
Inc. of $100.00 on December 31, 1997 with dividends reinvested, the cumulative
total value of the investment on December 31, 2002 would be $145.94. This
cumulative total value takes into account the second step conversion of Fidelity
Bankshares, MHC which was completed on May 15, 2001. 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.
{graph ommitted]
Period Ending
--------------------------------------------------------------------------
Index 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
- -------------------------------------------------------------------------------------------------------------------
Fidelity Bankshares, Inc. 100.00 72.65 47.97 70.64 143.12 163.90
S&P 500 100.00 128.55 155.60 141.42 124.63 96.95
NASDAQ - Total US* 100.00 140.99 261.48 157.42 124.89 86.33
SNL $1B-$5B Bank Index 100.00 99.77 91.69 104.05 126.42 145.94
9
<page>
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The following table sets forth the cash compensation paid for services
during the years ended December 31, 2002, 2001 and 2000 to Fidelity Bankshares,
Inc.'s Chief Executive Officer and Fidelity Bankshares, Inc.'s five most highly
compensated executive officers other than the Chief Executive Officer.
====================================================================================================================================
Summary Compensation Table
====================================================================================================================================
============================================================================== ==================================== ================
Annual Compensation Long-Term
===================================
Compensation Awards
- ------------------------------------------------------------------------------ ------------------------------------ ----------------
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
Name and Year Ended Salary Bonus Other Restricted Options/SARs Payouts All Other
Annual Stock
Compensation Award(s) Compensation
Principal Position December 31, ($)(1) ($)(2) ($)(3)(4) ($)(5) (#)(6) ($)(7)
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
Vince A. Elhilow 2002 $ 368,000 $ 291,215 $48,206 129,000 -- $52,976
President and Chief 2001 340,000 105,071 49,186 $1,397,940 -- -- 52,392
Executive Officer 2000 316,800 159,853 39,707 -- -- -- 45,022
--
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
Joseph C. Bova 2002 $ 195,000 $ 92,075 $12,013 $ 607,800 49,000 -- $34,980
Executive Vice 2001 180,000 35,360 12,013 -- -- -- 35,055
President--Lending 2000 165,000 49,597 1,938 -- -- -- 29,318
Operations
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
Christopher H. Cook 2002 $ 197,000 $ 92,075 $ 8,284 $ 607,800 49,000 -- $29,008
Executive Vice 2001 182,000 35,360 8,072 -- -- -- 32,117
President 2000 169,000 49,597 7,860 -- -- -- 27,804
Corporate Counsel
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
Richard D. Aldred 2002 $ 197,000 $ 92,075 $ 550 $ 607,800 49,000 -- $35,394
Executive Vice 2001 182,000 35,360 550 -- -- -- 36,278
President--Finance 2000 169,000 49,597 3,050 -- -- -- 30,077
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
Robert L. Fugate 2002 $ 192,000 $ 92,075 $ 5,280 $ 607,800 49,000 -- $33,794
Executive Vice 2001 177,000 35,360 5,280 -- -- -- 34,732
President--Banking 2000 162,000 49,597 6,314 -- -- -- 28,581
Operations Manager
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
- ---------------------- --------------- ----------- ----------- --------------- ----------- -------------- --------- ----------------
J. Robert McDonald 2002 $ 170,000 $ 33,784 $15,008 $ 243,120 20,000 -- $31,188
Executive Vice 2001 161,000 16,287 15,664 -- -- -- 33,348
President-- 2000 152,000 20,338 13,598 -- -- -- 27,671
Appraisal; President
of FRAS
====================== =============== =========== =========== =============== =========== ============== ========= ================
- --------------------------------
(1) Includes compensation deferred at the election of the named individual
under Fidelity Federal Bank & Trust's savings plan for employees, Fidelity
Federal Bank & Trust's flexible benefit plan and Fidelity Federal Bank &
Trust's long-term deferred compensation plan.
(2) Includes amounts deferred at the election of the executive under Fidelity
Federal Bank & Trust's management performance plan.
(3) Includes $29,400, $2,400 and $2,400 of Directors' fees for Fidelity Federal
Bank & Trust and its subsidiaries, payable to Messrs. Elhilow, McDonald and
Bova, respectively, in 2002.
(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) The value of the restricted stock awards represents the number of shares
awarded multiplied by $20.26, which was the per share closing price on the
date of the award. The restricted stock awards vest ratably over a five
year period.
(6) The stock options granted vest ratably over a five year period.
(7) Includes amount allocated to executive officers under Fidelity Federal Bank
& Trust employee stock ownership plan, long-term deferred compensation plan
and matching contributions allocated under Fidelity Federal Bank & Trust's
savings plan for employees.
10
<page>
Employment and Severance Arrangements
Employment Agreement. Fidelity Federal Bank & Trust has entered into an
employment agreement with Vince A. Elhilow, President and Chief Executive
Officer of Fidelity Federal Bank & Trust. The employment agreement is intended
to ensure that Fidelity Federal Bank & Trust and Fidelity Bankshares, Inc. will
be able to maintain a stable and competent management. The continued success of
Fidelity Federal Bank & 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 has a three-year "evergreen" term and may be
renewed for an additional year on each anniversary date of the agreement so that
the remaining term is 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 executive's base salary will be
reviewed annually. Effective January 1, 2003, the current base salary of Mr.
Elhilow is $390,000. In addition to the base salary, the employment agreement
provides that the executive will receive all benefits provided to permanent
full-time employees of Fidelity Federal Bank & 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 & Trust for cause at any time. In the event
Fidelity Federal Bank & 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 & Trust upon: (i)
failure to reelect 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 & Trust; or (v) a breach of the agreement
by Fidelity Federal Bank & 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 & Trust.
If termination, whether voluntary or involuntary, follows a change in
control of Fidelity Federal Bank & 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 & 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 & 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 & Trust in any city, town or
county in which Fidelity Federal Bank & Trust maintains an office or has filed
an application to establish an office.
Severance Plan. Fidelity Federal Bank & 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 & Trust or Fidelity Bankshares, Inc.
Following a change of control of Fidelity Bankshares, Inc. or Fidelity Federal
Bank & Trust, as defined in the Severance Agreements, the officer shall be
entitled to a payment under a severance agreement if the 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 the 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.
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Directors' Compensation
The Chairman of the Board receives a monthly fee of $2,250 and each
director receives a monthly meeting fee of $2,250. Committee chairmen receive
fees of $425 for each meeting attended and committee members receive $300 for
each meeting attended. Fidelity Federal Bank & Trust paid a total of $249,475 in
director and committee fees during the fiscal year ending December 31, 2002. In
addition, Fidelity Federal Bank & Trust has one chairman emeritus who receives
$3,400 monthly as a director of Fidelity Federal Bank & Trust. One director
emeritus does not receive any fee; however, he receives $1,462 monthly under
Fidelity Federal Bank & Trust's Retirement Plan for directors. The directors
emeriti meet informally with members of Fidelity Federal Bank & Trust to discuss
general matters affecting Fidelity Federal Bank & 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 & 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' fees for their 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, 2002, the cost of the Director's Plan to Fidelity Federal
Bank & Trust was $86,626.
Our directors are also eligible to receive certain equity compensation
under the 2002 Stock Incentive Benefit Plan, discussed in this proxy statement
beginning on page 16.
Benefits
Defined Benefit Plan. Fidelity Federal Bank & 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 &
Trust for a period of one year and who have been credited with 1,000 or more
hours of employment with Fidelity Federal Bank & Trust during the year are
eligible to accrue benefits under the defined benefit plan. Fidelity Federal
Bank & Trust contributes annually 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 hired after December 31, 2000 are not entitled to participate in the
defined benefit plan. Employees who are not eligible to participate in the
defined benefit plan are 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 & Trust. Upon
termination of employment other than as specified above, a participant who was
employed by Fidelity Federal Bank & 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, 2002, the market value of the
retirement plan trust fund was approximately $12.7 million. For the plan year
ended December 31, 2002, Fidelity Federal Bank & Trust made a contribution to
the retirement plan of $2.0 million.
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The following table indicates the annual retirement benefit that would be
payable under the retirement plan upon retirement at age 65 in calendar year
2002, 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, 2002, for each of the individuals named in the cash
compensation table.
Years of
Name Credited Service
Vince A. Elhilow........................................ 39.9
J. Robert McDonald...................................... 46.3
Richard D. Aldred....................................... 18.0
Joseph C. Bova.......................................... 31.2
Robert L. Fugate........................................ 30.6
Christopher H. Cook..................................... 6.9
Savings Plan for Employees. Fidelity Federal Bank & 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. Since April 1, 2001, new employees and employees not previously
eligible, other than certain excluded employees, have been eligible to make
salary deferral contributions on the first day of the month following their 90th
day of employment. Part-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 &
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 (25% of compensation, effective January 1, 2003). 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 & 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 & 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 & Trust has amended the 401(k) plan to provide that
employees 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 under the defined benefit plan, which has been closed
to employees hired after December 31, 2000. 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.
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, 2002, the market value of the 401(k) plan
trust fund equaled approximately $20.5 million. The contribution to the 401(k)
plan for the plan year ended December 31, 2002, was $564,900. During the year
ended December 31, 2001, Fidelity Federal Bank & Trust contributed $5,500,
$4,650, $5,500, $5,500, $5,500 and $5,500 to the accounts of Messrs. Elhilow,
McDonald, Aldred, Bova, Fugate and Cook, respectively.
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Supplemental Executive Retirement Plan. Fidelity Federal Bank & Trust
maintains a non-qualified supplemental executive retirement plan for certain
executives of Fidelity Federal Bank & Trust to compensate those executive
participants in Fidelity Federal Bank & Trust's retirement plan whose benefits
are limited by Sections 415 or 401(a)(17) of the Internal Revenue Code. As of
December 31, 2002, 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 & 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 Employee Retirement Income Security Act ("ERISA") purposes. All
obligations arising under the supplemental executive retirement plan are payable
from the general assets of Fidelity Federal Bank & Trust; however, Fidelity
Federal Bank & 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 &
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.
Years of Service and Benefits 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
As of December 31, 2002, Messrs. Elhilow, McDonald, Aldred, Bova, Fugate
and Cook had 39.9, 46.3, 18.0, 31.2, 30.6 and 6.9 years, respectively, of
credited service under the supplemental executive retirement plan. 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 & Trust's cost attributable to the
supplemental executive retirement plan was $1,440,000 for the year ended
December 31, 2002.
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With respect to the executives participating in the supplemental executive
retirement plan, the Company has agreed to reimburse them for any excise taxes
which may be imposed on them under the federal tax code in connection with
payments made following a change in control.
Long-Term Deferred Compensation Plan. Fidelity Federal Bank & Trust
maintains a long-term deferred compensation plan for selected officers
designated by the Board of Directors. As of December 31, 2002, 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 & 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 & 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 & 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 &
Trust's general creditors. For the year ended December 31, 2002, Fidelity
Federal Bank & Trust vested and funded $36,800, $17,000, $19,700, $19,500,
$19,200 and $19,700 to the account balances of Messrs. Elhilow, McDonald,
Aldred, Bova, Fugate and Cook, respectively.
Senior Management Performance Incentive Award Program. Fidelity Federal
Bank & 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 & Trust's success during the year. The senior management performance award
program has two elements: a bonus program for 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 & 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 & 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. Fidelity Federal Bank & 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 in
the event of such officer's death. If a participant does not designate a
beneficiary, Fidelity Federal Bank & Trust will pay the participant's benefits
to his or her spouse, children, or estate.
Supplemental Disability Income. Fidelity Federal Bank & 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 age 60.
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Employee Stock Ownership Plan and Trust. Fidelity Federal Bank & 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 who are 21 years or older who
have worked at least 12 months (with at least 1000 hours of service) for
Fidelity Federal Bank & Trust 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 originally purchased 193,200 shares
of common stock in connection with the initial stock offering by Fidelity
Federal Bank & Trust. In April 2001, the employee stock ownership plan purchased
521,758 shares of the Company's common stock in connection with the
mutual-to-stock conversion of Fidelity Federal Bank & Trust's mutual holding
company, and funded such purchase with a loan from the Company. The loan is
being repaid principally from Fidelity Federal Bank & 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 & 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 Benefits Committee consisting of all
of the non-employee directors of Fidelity Federal Bank & 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 Benefits 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 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 to the 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.
2002 Incentive Stock Benefit Plan. During the year ended December 31, 2002,
the Company adopted, and the Company's stockholders approved the 2002 Incentive
Stock Benefit Plan (the "2002 Plan"). Under the 2002 Plan, the Company may issue
to key employees and non-employee directors up to 1,217,432 shares of Company
common stock pursuant to grants of stock options, limited rights, reload
options, dividend equivalent rights or stock awards, provided that no more than
347,838 shares may be issued as stock awards. The term of awards under the 2002
Plan, with the exception of stock awards, is ten years from the date of grant,
and the shares subject to such awards will be adjusted in the event of any
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, combination or exchange of shares or other change in the corporate
structure of the Company. A stock option gives the option holder the right to
purchase shares of common stock at a specified price for a specified period of
time. The exercise price shall not be less than the fair market value on the
date the stock option is granted. A limited right gives the holder the right,
upon a change in control of the Company or the Bank, to receive the excess of
16
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the market value of the shares represented by the limited rights on the date
exercised over the exercise price. The limited rights are subject to the same
terms and conditions as the stock options. Payment upon exercise of limited
rights will be in cash, or in the event of a merger transaction, for shares of
the acquiring corporation or its parent, as applicable. The dividend equivalent
rights entitle the holder to receive an amount of cash at the time that certain
extraordinary dividends are declared equal to the amount of the extraordinary
dividend multiplied by the number of options that the person holds. For these
purposes, an extraordinary dividend is defined as any dividend where the rate of
dividend exceeds the Bank's weighted average cost of funds on interest-bearing
liabilities for the current and preceding three quarters and the annualized
aggregate dollar amount of the dividend exceeds the Bank's net income after
taxes for the current quarter and preceding three quarters. The reload options
entitle the holder, who has delivered shares that he or she owns as payment of
the exercise price for option stock, to a new option to acquire additional
shares equal in amount to the shares he or she has traded in. Reload options may
also be granted to replace option shares retained by the employer for payment of
the option holder's withholding tax. The option price at which additional shares
of stock can be purchased by the option holder through the exercise of a reload
option is equal to the market value of the shares on the date the original
option is exercised. The option period during which the reload option may be
exercised expires at the same time as that of the original option that the
holder has exercised. For the year ended December 31, 2002, Messrs. Elhilow,
McDonald, Aldred, Bova, Fugate and Cook received 69,000, 12,000, 30,000, 30,000,
30,000 and 30,000 shares of restricted stock, respectively, and options to
purchase 129,000, 20,000, 49,000, 49,000, 49,000, and 49,000 shares of common
stock under the 2002 Plan. In addition, our non-employee directors received the
following under the 2002 Plan: Messrs. Warren, Brown and Beaty each received
17,390 shares of restricted stock, Mr. Watson received 14,000 shares of
restricted stock, Mr. Bremer received 12,000 shares of restricted stock and all
non-employee directors received options to purchase 43,400 shares of our common
stock. Restricted stock granted under the 2002 Plan will vest ratably over a
five-year period commencing in 2003. Options awards to non-employee directors
will vest at the rate of 16 2/3% over a six-year period commencing on the date
of grant and those awarded to employees will vest at a rate of 20% each year and
will be fully vested five years after the date of grant.
The following table sets forth information relating to options granted to
the Named Executive Officers during 2002. No options were granted pursuant to
the 1994 Incentive Stock Option Plan.
======================================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
======================================================================================================================
======================================================================================================================
Individual Grants
- ----------------------------------------------------------------------------------------------------------------------
- ---------------------------- ---------------- ------------------- ------------ -------------- ------------------------
Name Options Percent of Total Exercise Expiration Grant Date Present
Options Granted
to Employees in or Base
Granted(1) FY 2002 Price Date Value
- ---------------------------- ---------------- ------------------- ------------ -------------- ------------------------
- ---------------------------- ---------------- ------------------- ------------ -------------- ------------------------
Vince A. Elhilow 129,000 15.5% $20.26 5/21/2012 $ 635,970
- ---------------------------- ---------------- ------------------- ------------ -------------- ------------------------
J. Robert McDonald 20,000 2.4% $20.26 5/21/2012 $ 98,600
- ---------------------------- ---------------- ------------------- ------------ -------------- ------------------------
Richard D. Aldred 49,000 5.9% $20.26 5/21/2012 $ 241,570
- ---------------------------- ---------------- ------------------- ------------ -------------- ------------------------
- ---------------------------- ---------------- ------------------- ------------ -------------- ------------------------
Joseph C. Bova 49,000 5.9% $20.26 5/21/2012 $ 241,570
- ---------------------------- ---------------- ------------------- ------------ -------------- ------------------------
- ---------------------------- ---------------- ------------------- ------------ -------------- ------------------------
Robert L. Fugate 49,000 5.9% $20.26 5/21/2012 $ 241,570
- ---------------------------- ---------------- ------------------- ------------ -------------- ------------------------
- ---------------------------- ---------------- ------------------- ------------ -------------- ------------------------
Christopher H. Cook 49,000 5.9% $20.26 5/21/2012 $ 241,570
============================ ================ =================== ============ ============== ========================
- -----------------------------------
(1) The grant date present value was derived using the Black-Scholes
option pricing model with the following assumptions: volatility of
28.93%; risk free rate of return of 2.78%; dividend yield of 1.97%;
and a 5 year average expected term.
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1994 Incentive Stock Option Plan. Options to purchase 550,237 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 $3.76 per share (adjusted for
stock dividends and split since distribution).
Set forth below is information relative to options outstanding and
exercised under the 1994 Incentive Stock Option Plan and the 2002 Incentive
Stock Benefit Plans.
=====================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
=====================================================================================================================
Name Shares Acquired Value Number of Securities Value of Unexercised
Underlying Unexercised
Options at In-The-Money Options at
Upon Exercise Realized(1) Fiscal Year-End Fiscal Year-End(3)
-------------------------- ---------------------------
Exercisable/ Exercisable/
Unexercisable(2) Unexercisable
- ---------------------------- ---------------- ---------------- -------------------------- ---------------------------
Vince A. Elhilow 8,000 137,920 29,500/107,500 113,120/0
- ---------------------------- ---------------- ---------------- -------------------------- ---------------------------
J. Robert McDonald 0 0 0/0
20,000/0
- ---------------------------- ---------------- ---------------- -------------------------- ---------------------------
Richard D. Aldred 5,248 79,927 19,167/40,833 155,640/0
- ---------------------------- ---------------- ---------------- -------------------------- ---------------------------
Joseph C. Bova 8,000 133,920 16,548/40,833 118,507/0
- ---------------------------- ---------------- ---------------- -------------------------- ---------------------------
Robert L. Fugate 8,812 125,483 8,167/40,833 8,167/40,833
- ---------------------------- ---------------- ---------------- -------------------------- ---------------------------
Christopher H. Cook 0 0 12,990/40,833 68,197/0
============================ ================ ================ ========================== ===========================
(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) During 2002, no options under the 2002 Incentive Stock Benefit Plan were
exercised.
(3) 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, 2002, at which date the closing price of the common stock as
quoted on the Nasdaq National Market was at $17.90.
1994 Stock Option Plan for Non-Employee Directors. Options to purchase
183,410 shares of common stock were granted to non-employee 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 price of $3.76 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 common stock were 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.
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Compensation Plans
Set forth below is information as of December 31, 2002 regarding equity
compensation plans categorized by those plans that have been approved by
stockholders and those plans that have not been approved by stockholders.
====================================================================================================================
Plan Number of securities to be Weighted average Number of securities
issued upon exercise of
outstanding options and remaining available for
rights exercise price(2) issuance under plan
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved 1,314,154(1) $17.93
by stockholders................. 44,561(3)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by stockholders........ 0 0 0
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Total..................... 1,314,154 $17.93 44,561
====================================================================================================================
(1) Consists of options to purchase (i) 136,363 shares of common stock under
the 1994 Stock Option Plan and (ii) 829,950 shares of common stock under
the 2002 Stock Option Plan. Also includes restricted stock awards totaling
347,838 shares of common stock.
(2) The weighted average exercise price reflects the exercise price of $3.76
per share for options granted under the 1994 Stock Option Plan and $20.26
per share for options under the 2002 Plan. Does not take into effect the
grant of shares of restricted stock.
(3) Consists of options to purchase 4,917 shares under the 1994 Stock Option
Plan and 39,644 shares under the 2002 Plan.
- --------------------------------------------------------------------------------
TRANSACTIONS WITH CERTAIN RELATED PERSONS
- --------------------------------------------------------------------------------
Federal law requires all loans or extensions of credit to executive
officers and directors to 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
Fidelity Federal Bank & Trust'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.
All transactions between Fidelity Federal Bank & Trust 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
Fidelity Federal Bank & Trust than could have been obtained by it in
arm's-length negotiations with unaffiliated persons and will be approved by a
majority of independent non-employee directors of the bank not having any
interest in the transaction. During the year ended December 31, 2002, Fidelity
Federal Bank & Trust had no loans outstanding to directors or executive officers
which were made on preferential terms.
Section 402 of the Sarbanes-Oxley Act of 2002 generally prohibits an issuer
from: (1) extending or maintaining credit; (2) arranging for the extension of
credit; or (3) renewing an extension of credit in the form of a personal loan
for an officer or director. There are several exceptions to this general
prohibition, one of which is applicable to the Company. Sarbanes-Oxley does not
apply to loans made by a depository institution that is insured by the FDIC and
is subject to the insider lending restrictions of the Federal Reserve Act. All
loans to the Bank's directors and officers are made in conformity with the
Federal Reserve Act and the FDIC Regulation O.
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PROPOSAL II--RATIFICATION OF APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors of the Company has approved the engagement of
Deloitte & Touche LLP as the Company's auditors for the 2003 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, 2003. 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.
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Audit Fees. During the past two years the aggregate fees billed for
professional services rendered by Deloitte & Touche LLP (the "Independent
Auditor") for the audit of the Company's annual financial statements and for the
review of the Company's Forms 10-Q were $214,000 for 2002 and $185,300 for 2001.
Audit-related fees. During the past two years the aggregate fees billed for
professional services by the Independent Auditor that are reasonably related to
the performance of the audit were $32,600 for 2002 and $278,600 for 2001.
Audit-related fees in 2002 included $28,600 in audit fees for the Company's
employee benefit plans and $4,000 in consent issuance fees in conjunction with
the filing of a registration statement on Form S-8. Audit-related fees in 2001
included $26,100 in audit fees for the Company's employee benefit plans and
$251,200 in consent issuance fees for the filing of a registration statement on
Form S-8.
Tax Fees. During the past two fiscal years the aggregate fees billed for
professional services by the Independent Auditor for tax services were $56,500
for 2002 and $54,300 for 2001.
All Other Fees. The aggregate fees billed for professional services
rendered for the Company by the Independent Auditor for service other than those
listed above were $4,700 for 2002. No fees were paid in this category during
2001.
In order to ratify the selection of Deloitte & Touche LLP as the auditors
for the 2003 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 2003 fiscal year.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the Company's proxy materials for
next year's Annual Meeting of Stockholders, any stockholder proposal must be
received at the Company's executive office, 205 Datura Street, West Palm Beach,
Florida 33401, no later than December 22, 2003. 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 before
certain business or nominations to the Board of Directors may 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 90 days before
the date fixed for such meeting; provided, however, that in the event that less
than 100 days notice or prior public disclosure of the date of the meeting is
given or made, to be timely, notice by the stockholder 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 for 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 20, 2004. Accordingly, advance written notice of business or
nominations to the Board of Directors to be brought before the next Annual
Meeting of Stockholders must be given to the Company no later than January 15,
2004.
20
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- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Meeting other than the matters described above in this 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, 2002 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
/s/ Elizabeth M. Cook
----------------------------------
Elizabeth M. Cook
West Palm Beach, Florida
March 21, 2003
21
REVOCABLE PROXY
FIDELITY BANKSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
April 22, 2003
The undersigned hereby appoints the official proxy committee consisting of
the 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 the Annual Meeting of Shareholders
("Annual Meeting") to be held at the Crowne Plaza Hotel, 1601 Belvedere Road,
West Palm Beach, Florida, on April 22, 2003, at 10:00 a.m. Eastern Time. The
official proxy committee is authorized to cast all votes to which the
undersigned is entitled as follows:
FOR WITHHELD
1. The election as Director of all nominees
listed below each to serve for a three-year [ ] [ ]
term
Vince A. Elhilow Donald E. Warren, M.D.
INSTRUCTION: To withhold your vote for one or
more nominees, write the name of the nominee(s)
on the line(s) below.
----------------------------------
----------------------------------
FOR AGAINST ABSTAIN
2. The ratification of the appointment of [ ] [ ] [ ]
Deloitte & Touche LLP as the Company's
independent auditor for the fiscal year
ending December 31, 2003.
The Board of Directors recommends a vote "FOR" each of the listed proposals.
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 MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
22
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting
or at any adjournment thereof and after notification to the Secretary of the
Company at the Annual 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 Shareholders, or by the filing of a later proxy
prior to a vote being taken on a particular proposal at the Annual Meeting.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of notice of the Annual Meeting, a proxy statement dated
March 21, 2003 and audited financial statements.
Dated: _________________________ [ ] Check Box if You Plan
to Attend Annual 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.
Please complete and date this proxy and return it promptly
in the enclosed postage-prepaid envelope.
23