UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
Fidelity Bankshares, Inc.
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(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
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[ ] 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 17, 2005
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 West Palm Beach Marriott, 1001 Okeechobee Boulevard, West Palm Beach,
Florida, 33401 at 10:00 a.m. (local time) on April 19, 2005.
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.
The Board of Directors of the Company has determined that the matter to be
considered at the Annual Meeting is 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" the election of director nominees.
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
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 19, 2005
Notice is hereby given that the Annual Meeting of Fidelity Bankshares, Inc.
(the "Company") will be held at the West Palm Beach Marriott, 1001 Okeechobee
Boulevard, West Palm Beach, Florida, 33401, at 10:00 a.m. (local time) on April
19, 2005.
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 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 proposal 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 4, 2005 are the stockholders entitled to vote at the
Annual Meeting, and any adjournments thereof.
A list of stockholders entitled to vote at the Annual Meeting will be
available at the Company's Main Office, 205 Datura Street, West Palm Beach,
Florida 33401, for the 10 days immediately prior to the Annual Meeting. It also
will be available for inspection at the meeting itself.
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
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Elizabeth M. Cook
Secretary
West Palm Beach, Florida
March 17, 2005
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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) 803-9900
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ANNUAL MEETING OF STOCKHOLDERS
April 19, 2005
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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 West Palm Beach Marriott, 1001 Okeechobee
Boulevard, West Palm Beach, Florida, 33401, on April 19, 2005 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 17, 2005.
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REVOCATION OF PROXIES
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Stockholders who sign the proxies provided with these proxy materials
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. 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 proposal 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.
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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 4, 2005 (the "Record
Date") are entitled to one vote for each share then held. As of the Record Date,
the Company had 24,425,125 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. As to
the election of directors, the proxy card being provided by the Board of
Directors enables a stockholder to vote FOR the election of the two nominees or
to WITHHOLD AUTHORITY to vote for the nominees. Proxies solicited hereby will be
returned to the Company and will be tabulated by an Inspector of Election
designated by the Company's Board of Directors. 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.
In accordance with the provisions of the Company's Certificate of
Incorporation, record holders of common stock who beneficially own in excess of
10% of the issued and outstanding shares of common stock are not entitled to
vote any of the shares held in excess of that limit. The Certificate of
Incorporation further authorizes the Board of Directors (i) to make all
determinations necessary to implement and apply that limit, including
determining whether persons or entities are acting in concert, and (ii) to
demand that any person who is reasonably believed to beneficially own shares of
common stock in excess of the limit supply information to enable the Board of
Directors to implement and apply the limit.
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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.
Number of Shares of Common Percent of All Common
Name of Beneficial Owner Stock Beneficially Owned Stock Outstanding(1)
Vince A. Elhilow(2) 667,175 2.73%
Keith D. Beaty(3) 254,050 1.04
Paul C. Bremer(4) 63,990 0.26
F. Ted Brown, Jr.(5) 136,849 0.56
Donald E. Warren, M.D.(6) 144,067 0.59
Karl H. Watson(7) 64,651 0.26
Richard D. Aldred(8) 218,830 0.90
Joseph C. Bova(9) 160,046 0.66
Robert L. Fugate(10) 254,688 1.04
Christopher H. Cook(11) 107,766 0.44
Private Capital Management(12)
Fidelity Federal Bank & Trust ESOP 1,433,089 5.87
Savings Plan for Fidelity Federal Bank & Trust 1,024,901 4.20
All directors and executive
officers as a group.(13) 2,072,112 8.48%
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(1) Based upon 24,425,050 shares outstanding.
(2) Includes 104,429 shares held by the management performance plan. Includes
21,679 shares allocated under the Fidelity Federal Bank &Trust employee
stock ownership plan. Includes 48,087 shares held under the savings plan
for employees for the benefit of Mr. Elhilow. Includes 62,100 shares of
restricted stock and options to purchase 93,298 shares pursuant to the 2002
Incentive Stock Benefit Plan.
(3) Includes 15,651 shares of restricted stock and options to purchase 32,550
shares pursuant to the 2002 Incentive Stock Benefit Plan.
(4) Includes 10,800 shares of restricted stock and options to purchase 32,550
shares pursuant to the 2002 Incentive Stock Benefit Plan.
(5) Includes 15,651 shares of restricted stock and options to purchase 32,500
shares pursuant to the 2002 Incentive Stock Benefit Plan.
(6) Includes 15,651 shares of restricted stock and options to purchase 32,500
shares pursuant to the 2002 Incentive Stock Benefit Plan.
(7) Includes 12,600 shares of restricted stock and options to purchase 32,500
shares pursuant to the 2002 Incentive Stock Benefit Plan.
(8) Includes 13,500 shares held by the management performance plan. Includes
20,727 shares allocated under the Fidelity Federal Bank & Trust employee
stock ownership plan. Includes 15,831 shares held under the savings plan
for employees for the benefit of Mr. Aldred. Includes 27,000 shares of
restricted stock and options to purchase 29,460 shares pursuant to the 2002
Incentive Stock Benefit Plan.
(9) Includes 19,315 shares held by the management performance plan. Includes
20,220 shares allocated under the Fidelity Federal Bank & Trust employee
stock ownership plan. Includes 30,283 shares held under the savings plan
for employees for the benefit of Mr. Bova. Includes 27,000 shares of
restricted stock and options to purchase 24,974 shares pursuant to the 2002
Incentive Stock Benefit Plan.
(10) Includes 33,637 shares held by the management performance plan. Includes
18,369 shares allocated under the Fidelity Federal Bank & Trust employee
stock ownership plan. Includes 50,808 shares held under the savings plan
for employees for the benefit of Mr. Fugate. Includes 27,000 shares of
restricted stock and options to purchase 36,750 shares pursuant to the 2002
Incentive Stock Benefit Plan.
(11) Includes 7,609 shares allocated under the Fidelity Federal Bank & Trust
employee stock ownership plan. Includes 27,000 shares of restricted stock
and options to purchase 36,750 shares pursuant to the 2002 Incentive Stock
Benefit Plan.
(12) 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.
(13) Unless otherwise indicated, includes shares held directly by the
individuals as well as by spouses, in trust, and other indirect forms of
ownership of shares over which the individuals effectively exercise sole or
shared voting and investment power. Includes 180,662 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.
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PROPOSAL I--ELECTION OF DIRECTORS
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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
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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 F. Ted Brown, Jr. and Keith D. Beaty 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 Fidelity Federal Bank & Trust (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
F. Ted Brown, Jr. 76 Director 1990 2005
Keith D. Beaty 55 Director 1992 2005
DIRECTORS CONTINUING IN OFFICE
Vince A. Elhilow 65 Chairman of the Board, 1984 2006
Chief Executive Officer
and President
Donald E. Warren, M.D. 77 Director 1979 2006
Karl H. Watson 63 Director 1999 2007
Paul C. Bremer 61 Director 2000 2007
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(1) Where appropriate refers to the individual's service as a director of
Fidelity Federal Bank & Trust's mutual predecessor.
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. With the exceptions of Mr. Elhilow and Mr. Brown, the board of directors
has determined that each of the Company's directors qualifies as an "independent
director" under the Nasdaq corporate governance listing standards.
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.
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Keith D. Beaty is the retired 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, 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 &
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 and Chief Operating Officer 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 Securities and Exchange Commission
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. A Form 4
report of one purchase transaction for 100 shares was not reported on a timely
basis by Director Karl Watson. Other than set forth above, 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.
Attendance at Annual Meeting of Stockholders
The Company does not have a policy regarding director attendance at the
annual meetings of stockholders. Directors Keith D. Beaty, F. Ted Brown, Jr.,
Donald E. Warren, Paul C. Bremer, Karl H. Watson, and Vince A. Elhilow attended
the prior fiscal year's annual meeting of stockholders.
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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, 2004, the Board of Directors of the Company held 17 regular and
special meetings. Beginning in 2004, pursuant to Nasdaq rules, the independent
members of the Board of Directors meet in "executive session" without the
presence of management. These meetings occur quarterly in conjunction with
regularly scheduled meetings of the audit committee. During the year ended
December 31, 2004, 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.
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Compensation Committee
The Company does not have a separate compensation committee, because all
cash compensation paid to executive officers is paid by the Bank. The Executive
Compensation and Benefits Committee of the Bank meets periodically to review the
performance of officers and employees, and to determine compensation programs
and adjustments. During 2004 the Executive Compensation and Benefits Committee
was comprised of Directors Beaty, Bremer, Warren and Watson, each of whom is an
independent director. The Executive Compensation and Benefits Committee met once
during the year ended December 31, 2004.
Corporate Governance and Nominating Committee
The independent members of the Board of Directors serves as the Nominating
Committee, and consists of Directors Beaty, Bremer, Warren and Watson. During
the year ended December 31, 2004, one meeting of the Nominating Committee was
held.
The functions of the Nominating Committee include the following:
o to lead the search for individuals qualified to become members of the
Board and to select director nominees to be presented for stockholder
approval;
o to review and monitor compliance with the requirements for board
independence; and
o to review the committee structure and make recommendations to the
Board regarding committee membership.
The Corporate Governance and Nominating Committee has adopted a written
charter which is available at the Company's website at www.fidelityfederal.com.
The Nominating Committee does not have any written specific minimum
qualifications or skills that the committee believes must be met by either a
committee-recommended or a securityholder-recommended candidate in order to
serve on the committee. The Nominating Committee identifies nominees by first
evaluating the current members of the Board of Directors willing to continue in
service. Current members of the Board with skills and experience that are
relevant to the Company's business and who are willing to continue in service
are considered for re-nomination, balancing the value of continuity of service
by existing members of the Board with that of obtaining a new perspective. If
any member of the Board does not to wish to continue in service or if the
Nominating Committee or the Board decided not to re-nominate a member for
re-election, the Nominating Committee identifies the desired skills and
experience of a new nominee in light of the following criteria. When identifying
and evaluating new directors, the Nominating Committee considers the diversity
and mix of the existing board of directors, including, but not limited to, such
factors as: the age of the current directors, their geographic location (being a
community bank, there is a strong preference for local directors), minority and
female representation on the Board of Directors, employment experience,
community representation, public interest considerations and the implementation
of the Company's strategic plan. Among other things, when examining a specific
candidate's qualifications, the Nominating Committee considers: the ability to
represent the best interest of the Company, existing relationships with the
Company, interest in the affairs of the Company and its purpose, the ability to
fulfill director responsibilities, leadership skill, reputation within the
Company's community, community service, integrity, business judgment, ability to
develop business for the Company and the ability to work as a member of a team.
Article I, Section 6(c) of the Company's Bylaws sets forth the procedure to
be followed by stockholders who wish to nominate individuals as members of the
Board of Directors. A stockholder desiring to make a nomination to the Board
must deliver written notice of the nomination to the Secretary of the Company at
the Company's principal executive offices not less than ninety (90) days prior
to the date of the meeting, provided however, that in the event that less than
one hundred (100) days' notice or prior disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the 10th day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such stockholder's notice shall set forth: (i) as to each
person whom such stockholder proposes to nominate for election or re-election as
a Director, all information relating to such person that is required to be
disclosed in solicitations of proxies for the election of Directors, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934 (including such person's written consent to being named in
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the proxy statement as a nominee and to serving as a Director if elected); and
(ii) as to the stockholder giving notice (x) the name and address, as they
appear on the Company's books, of such stockholder and (y) the class and number
of shares of the Company's capital stock that are beneficially owned by such
stockholder.
At the request of the Board of Directors any person nominated by the Board
of Directors for election as a Director shall furnish to the Secretary of the
Company the information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a Director of the Company unless nominated in accordance with the
provisions of Section 6(c) of the Company's Bylaws. The Officer of the Company
or other person presiding at the meeting shall, if the facts so warrant,
determine that a nomination was not made in accordance with such provisions and,
if he or she should so determine, he or she shall declare so to the meeting and
the defective nomination shall be disregarded.
Procedures for the Nomination of Directors by Stockholders
In addition to the provisions set forth in the Company's Bylaws, the
Nominating Committee has adopted procedures for the submission of director
nominees by stockholders. If a determination is made that an additional
candidate is needed for the Board of Directors, the Nominating Committee will
consider candidates submitted by the Company's stockholders. Stockholders can
submit the names of qualified candidates for Director by writing to our
Corporate Secretary, at 205 Datura Street, West Palm Beach, Florida 33401. The
submission must include the following information:
o the name and address of the stockholder as they appear on the
Company's books, and number of shares of the Company's common stock
that are owned beneficially by such stockholder (if the stockholder is
not a holder of record, appropriate evidence of the stockholder's
ownership will be required);
o the name, address and contact information for the candidate, and the
number of shares of common stock of the Company that are owned by the
candidate (if the candidate is not a holder of record, appropriate
evidence of the stockholder's ownership should be provided);
o a statement of the candidate's business and educational experience;
o such other information regarding the candidate as would be required to
be included in the proxy statement pursuant to SEC Regulation 14A;
o a statement detailing any relationship between the candidate and the
Company or its subsidiaries;
o a statement detailing any relationship between the candidate and any
customer, supplier or competitor of the Company;
o detailed information about any relationship or understanding between
the proposing stockholder and the candidate; and
o a statement that the candidate is willing to be considered and willing
to serve as a Director if nominated and elected.
A nomination submitted by a stockholder for presentation by the stockholder
at an annual meeting of stockholders must comply with the procedural and
informational requirements described in "Other Matters and Advance Notice
Procedures."
The committee did not receive any securityholder-recommended nominees for
inclusion in this proxy statement, pursuant to the procedures set forth in the
Company's By-laws.
6
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Audit Committee
The Board of Directors has adopted a written charter for the Audit
Committee. The Audit Committee met nine times during the year ended December 31,
2004. During 2004 the Audit 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 at least twice a year with the
Company's independent auditors. Each member of the Audit Committee is
"independent" as defined under the Nasdaq listing standards and applicable
Exchange Act rules. Each member of the Audit Committee is able to read and
understand financial statements, and no member of the Audit Committee has
participated in the preparation of the Company's or the Bank's, or any of the
Bank's subsidiaries' financial statements during the past three years. Director
Bremer is deemed by the Company to be an "audit committee financial expert."
Director Bremer has an understanding of generally accepted auditing principles
(GAAP) and has the ability and experience to prepare, audit, evaluate and
analyze financial statements which present the breadth and level of complexity
of issues that the Company reasonably expects to be raised by the Company's
financial statements. Director Bremer has acquired these attributes as a
certified public accountant in practice with the accounting firm of Ernst &
Young.
The Audit Committee reviews and approves all related-party transactions of
the Company and the Bank, which would be required to be disclosed under
applicable Exchange Act rules. A representative of Deloitte & Touche LLP is
expected to attend the meeting and respond to appropriate questions and may make
a statement if he so desires.
Set forth below is information regarding fees incurred for professional
services rendered by Deloitte & Touche LLP in 2004 and 2003.
Audit Fees. During the past two years the aggregate fees incurred for
professional services rendered by Deloitte & Touche LLP (the "Independent
Registered Public Accounting Firm") for the audit of the Company's annual
financial statements and for the review of the Company's Forms 10-Q were,
$774,700 for 2004 and $248,700 for 2003. Included in those fees billed were
$437,500 and $0 during 2004 and 2003, respectively, for the audit of internal
controls over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 and the Federal Deposit Insurance Corporation
Improvement Act of 1991. Also included in those fees incurred in 2004 are
$26,100 and $61,100 in fees related to the filing of registration statements on
Form S-4 and Form S-3, respectively.
Audit-related fees. During the past two years the aggregate fees incurred
for professional services by the Independent Registered Public Accounting Firm
that are related to the performance of the audit were $30,000 for 2004 and
$40,700 for 2003. All audit-related fees were audit fees for the Company's
employee benefit plans.
Tax Fees. During the past two fiscal years the aggregate fees incurred for
professional services by the Independent Registered Public Accounting Firm for
tax services were $52,200 for 2004 and $42,600 for 2003.
All Other Fees. There were no other fees incurred for professional services
rendered for the Company by the Independent Registered Public Accounting Firm
for service other than those listed above in 2004 or 2003.
The Audit Committee considered whether the provision of non-audit services
was compatible with maintaining the independence of its auditors. The Audit
Committee concluded that performing such services in 2004 did not affect the
auditors' independence in performing their function as auditors of the Company.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Registered Public Accounting Firm
The Audit Committee's policy is to pre-approve all audit and non-audit
services provided by the independent registered public accounting firm. These
services may include audit services, audit-related services, tax services and
other services. Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to particular service or category of services and is
generally subject to a specific budget. The Audit Committee has delegated
pre-approval authority to its Chairman when expedition of services is necessary.
The independent registered public accounting firm and management are required to
periodically report to the full Audit Committee regarding the extent of services
provided by the independent registered public accounting firm in accordance with
this pre-approval, and the fees for the services performed to date. The tax fees
and other fees paid in 2004 and 2003 were approved per the Audit Committee's
pre-approval policies.
7
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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, 2004;
o Discussed with the independent public registered accounting firm 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
public registered accounting firm required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees,
and has discussed with the independent public registered accounting
firm 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, 2004.
This report has been provided by the Audit Committee:
Keith D. Beaty, Paul C. Bremer, Donald E. Warren, M.D. and Karl H. Watson
Compensation Committee Interlocks and Insider Participation
The Company does not independently compensate its executive officers,
directors, or employees. The Executive Compensation and Benefits Committee of
the Bank retains the principal responsibility for the compensation of the
officers, directors and employees of the Bank. The Executive Compensation and
Benefits Committee consists of Directors Beaty, Bremer, Warren and Watson, each
of whom is independent. The Executive Compensation and Benefits Committee
reviews the benefits provided to the Bank's officers and employees. During the
year ended December 31, 2004, the Executive Compensation and Benefits Committee
met one time.
Report of the Executive Compensation and Benefits 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 and Benefits 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 and Benefits 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 "independent" directors sit
8
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on the Executive Compensation and Benefits 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 and Benefits
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 and Benefits Committee
utilized six salary surveys, including the "Florida Bankers Salary Survey,"
"American Community Bankers Annual Salary Survey," the "Bank Administration
Institute Salary Survey" "Wyatt Company Salary Survey"and the "SNL Executive
Compensation Review." In addition, the Executive Compensation and Benefits
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 $433,000 for fiscal year 2005, which represented a 5.6%
increase from the Chief Executive Officer's base salary of $410,000 in fiscal
2004. The 2005 base salary was based upon the Chief Executive Officer's
performance and industry standards.
This report has been provided by the
Executive Compensation and Benefits Committee:
Directors Beaty, Bremer, Warren and Watson
Evaluation of disclosure controls and procedures
The Company has adopted controls and other procedures which are designed to
ensure that information required to be disclosed in this Proxy Statement and
other reports filed with the SEC is recorded, processed, summarized and reported
within time periods specified by the SEC. Under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we evaluated the effectiveness of the design and operation of
our disclosure controls and procedures as of the end of the fiscal year (the
"Evaluation Date"). Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that, as of the Evaluation Date, our
disclosure controls and procedures were effective in timely alerting them to the
material information relating to us (or our consolidated subsidiaries) required
to be included in this Proxy Statement.
Communications with the Board of Directors
Any stockholder who wishes to contact the Board of Directors or an
individual director may do so by writing to: Board of Directors, Fidelity
Bankshares, Inc. 205 Datura Street, West Palm Beach, Florida 33401.
Communications are reviewed by the Corporate Secretary and are then distributed
to the Board of Directors or individual director as appropriate depending on the
facts and circumstances outlined in the communications received. The Corporate
Secretary may attempt to handle an inquiry directly or forward a communication
for response by another employee of the Company, and the Corporate Secretary has
the authority not to forward a communication if it is primarily commercial in
nature, relates to an improper or irrelevant topic, or is unduly hostile,
threatening, illegal or otherwise inappropriate.
The Company has established separate procedures for the submission of
complaints regarding accounting, internal accounting controls, or auditing
matters, as required by Section 301 of the Sarbanes-Oxley Act of 2002. Such
communications may be submitted to the Chairman of the Audit Committee by
telephoning (561) 803-9980. Alternatively, such communications may be submitted
in writing to the following address: Attn: Corporate Secretary, Fidelity
Bankshares, Inc. 205 Datura Street, West Palm Beach, Florida 33401.
9
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Code of Ethics
The Company has adopted a Code of Ethics that is applicable to the
officers, directors and employees of the Company, including the Company's
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. The Code of
Ethics is available on the Company's website at www.fidelityfederal.com.
Amendments to and waivers from the Code of Ethics will also be disclosed on the
Company's website.
10
Performance Graph
Set forth hereunder is a performance graph comparing (a) the total return
on the common stock of the Company for the period beginning on January 1, 1999,
through December 31, 2004, (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, 1999 with dividends reinvested, the cumulative
total value of the investment on December 31, 2004 would be $839.24. 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.
[OBJECT OMITTED]
Period Ending
-----------------------------------------------------------------
Index 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
- --------------------------------------------------------------------------------------------------------------
Fidelity Bankshares, Inc. 100.00 147.25 298.32 341.65 609.49 839.24
NASDAQ Composite 100.00 60.82 48.16 33.11 49.93 54.49
Russell 2000 100.00 96.98 99.39 79.03 116.38 137.71
SNL $1B-$5B Thrift Index 100.00 120.87 172.33 220.68 330.98 375.11
11
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The following table sets forth the cash compensation paid for services
during the years ended December 31, 2004, 2003 and 2002 to the Company's Chief
Executive Officer and the Company's five most highly compensated executive
officers.
====================================================================================================================================
Summary Compensation Table
====================================================================================================================================
Annual Compensation Long-Term
===================================
Compensation Awards
- ------------------------------------------------------------------------------ ------------------------------------ ----------------
Name and Year Ended Salary Bonus Other Restricted Options/SARs Payouts All Other
Annual Stock
Compensation Award(s) Compensation
Principal Position December 31, ($)(1) ($)(2) ($)(3)(4) ($)(5) (#)(6) ($)(7)
- ---------------------- --------------- ----------- ----------- --------------- ------------- ------------- -------- ----------------
Vince A. Elhilow 2004 $ 410,000 $ 511,183 $ 50,601 $ -- -- -- $ 70,834
President and Chief 2003 390,000 346,918 48,418 -- -- -- 57,226
Executive Officer 2002 368,000 291,215 48,206 1,397,940 129,000 -- 52,976
- ---------------------- --------------- ----------- ----------- --------------- ------------- ------------- -------- ----------------
Joseph C. Bova 2004 $ 217,000 $ 159,745 $ 10,730 $ -- -- -- $ 50,536
Executive Vice 2003 207,000 108,044 12,013 -- -- -- 38,828
President--Lending 2002 195,000 92,075 12,013 607,800 49,000 -- 34,980
Operations
- ---------------------- --------------- ----------- ----------- --------------- ------------- ------------- -------- ----------------
Richard D. Aldred 2004 $ 217,000 $ 159,745 $ 6,669 $ -- -- -- $ 50,865
Executive Vice 2003 207,000 108,044 4,200 -- -- -- 38,926
President-- Finance 2002 197,000 92,075 550 607,800 49,000 -- 35,394
- ---------------------- --------------- ----------- ----------- --------------- ------------- ------------- -------- ----------------
Robert L. Fugate 2004 $ 217,000 $ 159,745 $ 5,280 $ -- -- -- $ 49,331
Executive Vice 2003 207,000 108,044 5,280 -- -- -- 38,310
President--Banking 2002 192,000 92,075 5,280 607,800 49,000 -- 33,794
Operations Manager
- ---------------------- --------------- ----------- ----------- --------------- ------------- ------------- -------- ----------------
Christopher H. Cook 2004 $ 217,000 $ 159,745 $ 10,242 $ -- -- -- $ 42,180
Executive Vice 2003 207,000 108,044 8,496 -- -- -- 35,874
President 2002 197,000 92,075 8,284 607,800 49,000 -- 29,008
Corporate Counsel
====================== =============== =========== =========== =============== ============= ============= ======== ================
- --------------------------------
(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
and $2,400 of Directors' fees for Fidelity Federal Bank & Trust and its
subsidiaries, payable to Messrs. Elhilow
and Bova, respectively, in 2004.
(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.
Employment and Change in Control Arrangements
Employment Agreements. The Company and the Bank have each entered into
employment agreements with Vince A. Elhilow, President and Chief Executive
Officer. The employment agreements have an initial three-year term and may be
renewed for an additional year on each anniversary date of the agreements so
that the remaining term is three years, unless written notice of nonrenewal is
given by the boards of directors after conducting a performance evaluation of
the executive. The agreements provide that Mr. Elhilow's base salary will be
reviewed annually. Effective January 1, 2004, the current base salary of Mr.
Elhilow is $410,000. In addition to the base salary, the employment agreements
provide that Mr. Elhilow will receive all benefits provided to permanent
full-time employees of the Bank and/or the Company, including among other
things, participation in stock benefit plans and other fringe benefits
applicable to executive personnel. In addition, Mr. Elhilow and his spouse will
be entitled to continuation of health care coverage upon his retirement or other
termination of employment. Such health care coverage will continue for the
lifetime of the executive and his spouse, provided that upon the executive and
his spouse's eligibility for Medicare coverage, such coverage will be
supplemental to Medicare coverage. Mr. Elhilow will also be provided with an
automobile, reimbursement for the cost of maintenance of such automobile, and
12
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reimbursement of business expenses, including reimbursement of fees for
membership in clubs and organizations deemed appropriate to further the business
of the Bank. It is expected that the compensation to Mr. Elhilow will be paid
primarily by the Bank. In the event that compensation required under the
agreements is not paid by the Bank, the Company is required to pay such
compensation to Mr. Elhilow. The employment agreements provide for termination
of Mr. Elhilow's employment for cause at any time.
In the event the Company or the Bank chooses to terminate Mr. Elhilow's
employment for reasons other than for cause, or for reasons other than
disability or due to retirement, or in the event of Mr. Elhilow's involuntary
termination by the Company or the Bank or voluntary resignation of the executive
following a change in control (as defined in the agreement) or in the event of
his voluntary resignation 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 the Company or the
Bank; or (v) a breach of the agreement by the Company or the Bank; or (vi) a
change in control of the Company or the Bank, the executive, (or in the event of
death, his beneficiary), would be entitled to a sum equal to his earned but
unpaid salary and benefits due under the remaining term of the employment
agreement and a sum equal to three times the sum of his highest annual rate of
base salary and the highest rate of bonus awarded to him during the prior three
years, payable, at his election, in a lump sum or bi-weekly during the remaining
term of the agreement.
The agreements also provide that Mr. Elhilow would be entitled to the
continuation of life insurance coverage for a period of 36 months after
termination. Mr. Elhilow would also become vested in any outstanding unvested
stock options or shares of restricted stock that have been awarded to him. He
would also be entitled to a cash payment equal to the present value of the
Bank's contributions that would have been made on his behalf under the Fidelity
Federal Bank & Trust's 401(k) plan and employee stock ownership plan and any
other defined contribution plan maintained by the Company or the Bank if he had
continued working for the Bank for 36 months following his termination. Mr.
Elhilow would also be entitled to a cash payment equal to the difference, if
any, between (i) the present value of benefits to which he would be entitled
under the Bank's supplemental executive retirement plan and any other
non-qualified deferred compensation plan maintained by the Company or the Bank
if he had continued working for the Bank for 36 months following his termination
and (ii) the present value of the benefits to which he is actually entitled
under any such plan due to his termination. In the event payments to Mr. Elhilow
include an "excess parachute payment" as defined in the Internal Revenue Code,
payments under the employment agreement entered with the Bank would be reduced
in order to avoid this result. The employment agreement entered into with the
Company would make up any benefits lost under the employment agreement with
Fidelity Federal Bank & Trust due to the such reduction to avoid an excess
parachute payment and would reimburse Mr. Elhilow for any additional taxes owed
as a result of having an such excess parachute payment.
Upon termination of Mr. Elhilow's employment agreement other than in
connection with a change in control, Mr. Elhilow agrees not to compete with the
Company or the Bank for a period of one year following such termination.
If Mr. Elhilow becomes disabled, he will be entitled to the payment of his
base salary for the remaining term of his employment agreements or one year,
whichever is longer, provided that any amount paid Mr. Elhilow pursuant to any
disability insurance would reduce the compensation he would receive. In the
event Mr. Elhilow dies while employed by the Bank, Mr. Elhilow's estate, legal
representative or beneficiary will be paid the executive's base salary for one
year.
Change in Control Agreements. The Company and the Bank have each entered
into change in control agreements with Messrs. Aldred, Bova, Cook, and Fugate.
These agreements provide certain benefits in the event of a change of control of
the Company or the Bank. Each of the change in control agreements provides for
an initial term of 36 months. Commencing on each anniversary date, the Boards of
Directors may extend any change in control agreement for an additional year.
Following a change in control of the Company or the Bank, each officer would be
entitled to a payment under the change in control agreement if the officer's
employment is involuntarily terminated during the term of such agreement, other
than for cause, or if the officer voluntarily terminates employment during the
term of such agreement as the result of a 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 from its
location immediately prior to the change in control. In the event that an
13
<Page>
officer's employment is terminated in connection with a change in control, he
will receive his earned but unpaid salary and benefits as of the date of
termination and a cash payment equal to three times the sum of the highest rate
of base salary and the highest rate of bonus awarded to the officer over the
prior three years, subject to the applicable withholding taxes. In addition to
the severance payment, each covered officer is entitled to receive life
insurance coverage for himself and health care coverage (including dental) for
him and his dependents for a period of 36 months following the date of
termination. In addition, the officer will become vested in any outstanding
unvested stock options or shares of restricted stock that have been awarded to
him. The officer will also be entitled to a cash payment equal to the present
value of the Bank's contributions that would have been made on his behalf under
the Fidelity Federal Bank & Trust's 401(k) plan and employee stock ownership
plan and any other defined contribution plan maintained by the Bank as if he had
continued working for 36 months following his termination. The officer will also
be entitled to a cash payment equal to the difference, if any, between (i) the
present value of benefits to which he would be entitled under the Bank's
supplemental executive retirement plan and any other deferred compensation plan
maintained by the Bank if he had continued working for the Bank for 36 months
following his termination and (ii) the present value of the benefits to which he
is actually entitled under any such plan due to his termination. In the event
payments to the officer include an "excess parachute payment" as defined in the
Internal Revenue Code, payments under the change in control agreements entered
into with the Bank would be reduced in order to avoid this result. The change in
control agreements entered into with the Company would make up any benefits lost
under the Bank's change in control agreements due to the such reduction to avoid
an excess parachute payment and would reimburse the executives for any
additional taxes owed as a result of having an excess parachute payment.
Directors' Compensation
Fees. Directors receive fees for their service to the Bank and are not
separately compensated by the Company. Directors receive a monthly meeting fee
of $2,250. Committee chairmen receive fees of $500 for each meeting attended and
committee members receive $400 for each meeting attended. The Audit Committee
chairman receives $800 for each meeting attended. The Bank paid a total of
$240,500 in director and committee fees during the fiscal year ending December
31, 2004. In addition, the Bank 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 the Bank's
Retirement Plan for Directors. The directors emeriti meet informally with
members of Fidelity Federal Bank & Trust to discuss general matters affecting
the Bank. 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. The Bank 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, 2004, the cost of the Director's Plan was $91,000.
Benefits
Defined Benefit Plan. The Bank 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 the Bank for a period of one year and who have been credited
with 1,000 or more hours of employment with the Bank during the year are
eligible to accrue benefits under the defined benefit plan. The Bank 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.
14
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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 monthly 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 years of credited service;
and (2) is .44% of average monthly compensation in excess of $1,417 multiplied
by the participant's years of 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 the
Bank. Upon termination of employment other than as specified above, a
participant who was employed by the Bank 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, 2004, the market value of the retirement plan
trust fund was approximately $17.5 million. For the plan year ended December 31,
2004, Fidelity Federal Bank & Trust made a contribution to the retirement plan
of $3.3 million.
The following table indicates the annual retirement benefit that would be
payable under the retirement plan upon retirement at age 65 in calendar year
2004, 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, 2004, for each of the individuals named in the cash
compensation table.
Years of
Name Credited Service
Vince A. Elhilow..................................... 41.9
Richard D. Aldred.................................... 20.0
Joseph C. Bova....................................... 33.2
Robert L. Fugate..................................... 32.6
Christopher H. Cook.................................. 8.9
Savings Plan for Employees. The Bank 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 the Bank'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 25% 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 the Bank), 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
15
<page>
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.
The Bank has amended the 401(k) plan to provide that employees hired on or
after January 1, 2001, are 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 are 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, 2004, the market value of the 401(k) plan
trust fund equaled approximately $34.4 million. The contribution to the 401(k)
plan for the plan year ended December 31, 2004, was $843,200.
Supplemental Executive Retirement Plan. The Bank maintains a non-qualified
supplemental executive retirement plan for certain executives of the Bank to
compensate those executive participants in the Bank's retirement plan whose
benefits are limited by Sections 415 or 401(a)(17) of the Internal Revenue Code.
As of December 31, 2004, there were 11 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 the Bank'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 the Bank. However, the Bank 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. The Bank 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.
16
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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, 2004, Messrs. Elhilow, Aldred, Bova, Fugate and Cook had
41.9, 31.0, 33.2, 32.6 and 8.9 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. The
Bank's cost attributable to the supplemental executive retirement plan was $1.9
million for the year ended December 31, 2004.
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. The Bank maintains a long-term
deferred compensation plan for selected officers designated by the Board of
Directors. As of December 31, 2004, the Board has designated 11 executives to
participate in the long-term deferred compensation plan, including Messrs.
Elhilow, 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, the Bank
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 the Bank'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 the Bank, 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 the Bank's general creditors. For the year ended
December 31, 2004, the Bank vested and funded $41,000, $21,700, $21,700, $21,700
and $21,700 to the account balances of Messrs. Elhilow, Aldred, Bova, Fugate and
Cook, respectively. In December 2004, in connection with the enactment of
Section 409A of the Internal Revenue Code, the Bank froze the long-term deferred
compensation plan. Section 409A of the Internal Revenue Code sets forth certain
requirements that must be satisfied by all deferred compensation plans under
which benefits are not both earned and vested prior to January 1, 2005. The Bank
has implemented a 2005 long-term deferred compensation plan which is intended to
comply with Section 409a of the Internal Revenue Code. The 2005 long-term
deferred compensation plan is substantially similar to the frozen plan except
that certain provisions, such as the hardship distribution provisions, have been
modified to conform to the new law. The same executives participate in the 2005
long-term deferred compensation plan. In addition, the ability to modify the
form or timing of distribution elections with respect to amounts deferred has
been eliminated. Under the 2005 long-term deferred compensation plan, no
distribution other than hardship distributions will commence earlier than six
months after termination of employment.
17
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Senior Management Performance Incentive Award Program. The Bank 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 the Bank'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, the Bank
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. 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. In December 2004, the Bank froze the non-qualified deferred
compensation plan component of the incentive award program and will not allow
future awards to be deferred.
Supplemental Survivor Benefit Plan. The Bank 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.
The Bank 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, the Bank will pay the
participant's benefits to his or her spouse, children, or estate.
Supplemental Disability Income. The Bank also has purchased long-term
disability income insurance policies for the benefit of Messrs. Elhilow, 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.
Employee Stock Ownership Plan and Trust. The Bank 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 the Bank 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 the Bank. 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 the Bank's mutual holding
company, and funded such purchase with a loan from the Company. The loan is
being repaid principally from the Bank'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. The
Bank'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 the Bank 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
18
<Page>
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
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. 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.
No options were granted to the Named Executive Officers pursuant to the
2002 Stock Option Plan.
19
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
=====================================================================================================================
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Acquired Value Options at In-The-Money Options at
Name Upon Exercise Realized(1) Fiscal Year-End Fiscal Year-End(2)
-------------------------- ---------------------------
Exercisable/ Exercisable/
Unexercisable Unexercisable
- ---------------------------- ---------------- ---------------- -------------------------- ---------------------------
Vince A. Elhilow 4,935 $ 87,300 93,298/96,750 $1,353,821/$1,452,217
- ---------------------------- ---------------- ---------------- -------------------------- ---------------------------
Richard D. Aldred 9,870 $ 178,844 29,460/36,750 $347,789/$551,617
- ---------------------------- ---------------- ---------------- -------------------------- ---------------------------
Joseph C. Bova 9,870 $ 168,678 29,974/36,750 $358,459/$551,617
- ---------------------------- ---------------- ---------------- -------------------------- ---------------------------
Robert L. Fugate -- $ -- 36,750/36,750 $551,617/$551,617
- ---------------------------- ---------------- ---------------- -------------------------- ---------------------------
Christopher H. Cook -- $ -- 36,750/36,750 $551,617/$551,617
============================ ================ ================ ========================== ===========================
(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, 2004, at which date the closing price of the common stock as
quoted on the Nasdaq National Market was at $28.51.
Compensation Plans
Set forth below is information as of December 31, 2004 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 1,486,425(1) $ 13.91
by stockholders................. 62,166(3)
- --------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by stockholders........ -- -- --
- --------------------------------------------------------------------------------------------------------------------
Total..................... 1,486,425 $ 13.91 62,166
====================================================================================================================
- -------------------
(1) Consists of options to purchase 1,190,919 shares of common stock under the
2002 Stock Option Plan. Also includes restricted stock awards totaling
295,506 shares of common stock.
(2) The weighted average exercise price reflects the exercise price of $13.91
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 62,166 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
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.
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
20
<Page>
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, 2004, 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 applicable regulations.
- --------------------------------------------------------------------------------
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 November 19, 2005. Any such proposals shall be
subject to the requirements of the proxy rules adopted under the Exchange Act.
- --------------------------------------------------------------------------------
OTHER MATTERS AND ADVANCE NOTICE PROCEDURES
- --------------------------------------------------------------------------------
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. There have been no material changes to these procedures
during the year ended December 31, 2004. 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 next year's Annual Meeting of Stockholders is expected to
be held is April 18, 2006. 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 19,
2006.
- --------------------------------------------------------------------------------
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, 2004 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.
Additionally, the Company's Annual Report on Form 10-K may be obtained by
accessing the Company's website at www.fidelityfederal.com.
21
<Page>
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Elizabeth M. Cook
Elizabeth M. Cook
West Palm Beach, Florida
March 17, 2005
<Page>
REVOCABLE PROXY
FIDELITY BANKSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
April 19, 2005
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 West Palm Beach Marriott, 1001 Okeechobee
Boulevard, West Palm Beach, Florida, 33401, on April 19, 2005, 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
F. Ted Brown, Jr. Keith D. Beaty
INSTRUCTION: To withhold your vote for one or
more nominees, write the name of the
nominee(s) on the line(s) below.
--------------------------
-------------------------------
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.
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.
<Page>
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 17, 2005 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.