[MID-STATE BANCSHARES LOGO]
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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To the Shareholders of Mid-State Bancshares:
NOTICE IS HEREBY GIVEN that, pursuant to its Bylaws and the call of its Board of
Directors, the Annual Meeting of Shareholders of Mid-State Bancshares
("Mid-State") will be held on Thursday, May 16, 2002, at 7:30 p.m., California
Time, at the Cliffs Resort, 2757 Shell Beach Road, Shell Beach, California, (the
"Meeting") for the following purposes:
1. Election of Directors. To consider and vote upon a proposal to elect four
(4) persons to the Board of Directors of Mid-State to serve until the 2005
Annual Meeting of Shareholders and until their successors have been elected
and have qualified. The Board of Directors has nominated the following
persons for election:
Robert J. Lagomarsino Carrol R. Pruett
Gregory R. Morris William L. Snelling
2. Other Business. To transact any other business which may properly come
before the Meeting or any adjournments or postponements thereof.
Only those shareholders of record at the close of business on March 29, 2002,
are entitled to notice of and to vote at the Meeting or any adjournments or
postponements thereof (the "Record Date").
Section 2.11 of the Mid-State bylaws provide for the nomination of directors as
follows:
"Nominations for election of members of the Board of Directors may be made by
the Board of Directors or by any shareholder of any outstanding class of capital
stock of the Corporation entitled to vote for the election of directors. Notice
of intention to make any nominations (other than for persons named in the notice
of the meeting at which such nomination is to be made) shall be made in writing
and shall be delivered or mailed to the president of the Corporation by the
later of the close of business 21 days prior to any meeting of shareholders
called for the election of directors or 10 days after the date of mailing of
notice of the meeting to shareholders. Such notification shall contain the
following information to the extent known to the notifying shareholder: (a) the
name and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the number of shares of capital stock of the corporation
owned by each proposed nominee; (d) the name and residence address of the
notifying shareholder; (e) the number of shares of capital stock of the proposed
nominee, a copy of which shall be furnished with the notification, whether the
proposed nominee has ever been convicted of or pleaded nolo contendere to any
criminal offense involving
dishonesty or breach of trust, filed a petition in bankruptcy, or been adjudged
bankrupt. The notice shall be signed by the nominating shareholder and by the
nominee. Nominations not made in accordance herewith shall be disregarded by the
chairman of the meeting, and upon his instructions, the inspectors of election
shall disregard all votes cast for each such nominee. The restrictions set forth
in this paragraph shall not apply to nomination of a person to replace a
proposed nominee who has died or otherwise become incapacitated to serve as a
director between the last day for giving notice hereunder and the date of
election of directors if the procedure called for in this paragraph was followed
with respect to the nomination of the proposed nominee."
IT IS VERY IMPORTANT THAT EVERY SHAREHOLDER VOTE. WE URGE YOU TO SIGN AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW
YOUR PROXY AND VOTE IN PERSON AT THAT TIME. YOU MAY REVOKE YOUR PROXY AT ANY
TIME PRIOR TO ITS EXERCISE.
PLEASE INDICATE ON THE PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING SO WE CAN PROVIDE ADEQUATE ACCOMMODATIONS.
By order of the Board of Directors
/s/ Raymond E. Jones
Raymond E. Jones
April 15, 2002 Secretary
[MID-STATE BANCSHARES LOGO]
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PROXY STATEMENT
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This Proxy Statement ("Proxy Statement") is being furnished to shareholders of
Mid-State Bancshares ("Mid-State"), in connection with the solicitation of
proxies by the Board of Directors of Mid-State for use at the Annual Meeting of
Shareholders of Mid-State (including any adjournments thereof) to be held on May
16, 2002 ("Meeting").
This Proxy Statement relates to the election of four directors for the Board of
Directors of Mid-State, and any such other business as may properly come before
the Meeting. This Proxy Statement is dated April 15, 2002, and is first being
mailed to shareholders of Mid-State on or about April 15, 2002.
Date, Time and Place
The Meeting will be held on Thursday, May 16, 2002, at the Cliffs Resort, 2757
Shell Beach Road, Shell Beach, California, at 7:30 p.m., California Time, and
any adjournment or adjournments thereof.
Record Date
The Board has fixed the close of business on March 29, 2002, as the Record Date
for the determination of shareholders entitled to notice of, and to vote at, the
Meeting ("Record Date"). Accordingly, only holders of record of shares of
Mid-State Common Stock, no par value ("Mid-State Stock") at the close of
business on the Record Date will be entitled to vote at the Meeting and any
adjournment thereof. As of Record Date, there were 24,093,599 shares of
Mid-State Stock outstanding, held by approximately 3,800 shareholders of record.
Proxies and Revocability of Proxies
A proxy card for voting at the Meeting is enclosed with this Proxy Statement.
When a proxy card is returned, properly signed and dated, the shares represented
thereby will be voted in accordance with the instructions on the proxy card. If
a shareholder does not attend the Meeting and does not return the signed proxy
card, such holder's shares will not be voted and this will have the effect of a
vote "AGAINST" the matters to be voted on at the Meeting. Shareholders are urged
to mark the box on the proxy card to indicate how the shares represented by the
proxy card are to be voted. If a shareholder returns a signed proxy card but
does not indicate how his or her shares are to be voted, such shares will be
voted "FOR" the election of the four directors named herein. The proxy card also
confers discretionary authority on the individual appointed by the Board named
on the proxy card to vote the shares represented thereby on any other matter
that is properly presented for action at the Meeting. A shareholder who has
given a proxy may revoke it at any time prior to its exercise at the Meeting by
delivering an instrument of revocation to the secretary of Mid-State, by duly
executing and submitting a proxy card bearing a later date, or by appearing at
the Meeting and voting in person. The mere presence at the Meeting of the person
who has given a proxy will not revoke such proxy.
1
Costs of Solicitations of Proxies
Mid-State will bear its own costs in connection with this solicitation. It is
contemplated that proxies will be solicited principally through the mails, but
directors, officers and regular employees of Mid-State, or its banking
subsidiary, may solicit proxies (for no additional compensation) by personal
interview, telephone, telex, telegram, facsimile or similar means of
communication. Although there is no formal agreement to do so, Mid-State may
reimburse banks, brokerage houses and other custodians, nominees and fiduciaries
for their reasonable expenses in forwarding these proxy materials to their
principals.
Outstanding Securities; Quorum
As of the Record Date, there were issued and outstanding 24,093,599 shares of
Mid-State Stock. The presence, either in person or by properly executed proxies,
of the holders of a majority of the outstanding shares of Mid-State Stock is
necessary to constitute a quorum at the Meeting. Abstentions will be counted for
purposes of establishing a quorum.
Vote Required
Shareholders are entitled to one vote at the Meeting for each share of Mid-State
Stock held of record by them on the Record Date. The candidates receiving the
highest number of affirmative votes up to the number of directors to be elected
will be elected. Cumulative voting is not permitted under Mid-State's Articles
of Incorporation.
As of the Record Date, Mid-State knew of no person who owned more than five
percent (5%) of the outstanding shares of Mid-State Stock. As of the Record
Date, directors and executive officers(a) of Mid-State beneficially owned an
aggregate of 2,078,162 shares of Mid-State Stock (including shares issuable upon
exercise of stock options within 60 days of the Record Date), or approximately
8.62% of the outstanding shares of Mid-State Stock.
ELECTION OF DIRECTORS
Mid-State's Bylaws and implementing resolutions provide for Mid-State to have a
total of eleven (11) directors. Mid-State has a "Classified" Board of Directors.
A "Classified" Board means that the directors are divided into three classes
with staggered terms. As a result, four persons will be elected at the Meeting
to a term of three years. At subsequent annual meetings of the Mid-State's
shareholders, a number of directors will be elected equal to the number of
directors with terms expiring at that annual meeting. The directors so elected
at these subsequent annual meetings will each be elected for a three-year term.
Set forth below is the slate of directors to be considered for re-election. In
the event that any of the nominees should be unable to serve as a director, it
is intended that proxies will be voted for the election of such substitute
nominee, if any, as shall be designated by the Board of Directors. Management
has no reason to believe that any nominee will become unavailable.
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(a) For purposes of this Proxy Statement, the executive officers are deemed to
include the President and Chief Executive Officer, Executive Vice President, and
Chief Financial Officer of Mid-State Bancshares and the President and Chief
Executive Officer, Executive Vice President and Chief Credit Officer, and
Executive Vice President and Chief Financial Officer of Mid-State Bank & Trust,
a total of three (3) individuals.
2
SLATE OF DIRECTORS
[Photo of Robert J. Lagomarsino]
Robert J. Lagomarsino has been a director of Mid-State Bancshares since 2001,
when Mid-State Bancshares acquired Americorp, a bank holding company located in
Ventura, where he was chairman of the board. Mr. Lagomarsino served 18 years in
the United States House of Representatives, where he was a member of the Foreign
Relations Committee and Committee on Interior and Insular Affairs. He also
served 12 years in the California Senate. He is a graduate of the University of
California at Santa Barbara and the Santa Clara University School of Law. He is
president of Lagomarsino Minerals and vice president of Lagomarsino's Inc.
[Photo of Gregory R. Morris]
Gregory R. Morris has been a director of Mid-State Bancshares since its
formation in 1998 and a director of Mid-State Bank & Trust since 1987. He is
president of Morris & Garritano Insurance, an agency he founded in 1964. He is a
past director of Insurance Brokers and Agents of the West and president of the
San Luis Obispo County chapter of the American Heart Association. He is a
graduate of Santa Clara University. Mr. Morris is chairman of Mid-State
Bancshares Audit Committee and a member of Mid-State Bancshares Compensation
Committee.
[Photo of Carrol R. Pruett]
Carrol R. Pruett is the chairman of the board of Mid-State Bancshares and
Mid-State Bank & Trust. He has been a director of Mid-State Bancshares since
1998 and a director of Mid-State Bank & Trust since 1967. He served as president
and chief executive officer of Mid-State Bank & Trust for 33 years. He retired
from that position in June 2000. He served as president and chief executive
officer of Mid-State Bancshares since its formation in 1998 until June 2001 when
he retired from that position. A graduate of California Polytechnic State
University, San Luis Obispo, he is a past president of the California Bankers
Association. He was one of the first inductees into the Pacific Coast Banking
School's Hall of Fame. Mr. Pruett is chairman of Mid-State Bancshares Nominating
Committee and a member of Mid-State Bank & Trust's Board Loan Committee.
[Photo of William L. Snelling]
William L. Snelling has been a director of Mid-State Bancshares since 1998. He
was a founding director of the former Bank of Santa Maria, which merged with
Mid-State Bank & Trust in 1998. He is a founder and chairman of the board of
California Commercial Spaceport Inc. He earned a master's degree in management
from UCLA and a juris doctorate degree from Southwestern University. Mr.
Snelling is a member of Mid-State Bancshares Audit Committee and Mid-State Bank
& Trust's Board Loan Committee. He is an alternate member of Mid-State
Bancshares Compensation Committee.
3
The following tables set forth certain information, as of March 29, 2002, with
respect to the four persons nominated by the Board of Directors for election as
directors, the seven continuing directors whose terms do not expire at the
Meeting, and Mr. Raymond E. Jones, whose term expires May 16, 2002 and who is
not standing for re-election. Mid-State knows of no arrangements, including any
pledge by any person of securities of Mid-State, the operation of which may, at
a subsequent date, result in a change in control of Mid-State. There are no
arrangements or understandings by which any of the directors of Mid-State were
selected. There are no family relationships between any of the directors or
executive officers.
The following four persons have been nominated for election:
Common Stock Beneficially
Owned On March 29, 2002
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Name, Address(1) Year First (2) Percentage of
and Relationship with the Elected or Shares
Company of Beneficial Principal Occupation for Appointed Director Number Outstanding
Owner Past Five Years Age Bancshares/Bank Term(3) of Shares(4) (5)
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Robert J. Lagomarsino President, Lagomarsino 75 2001/Bancshares III 148,599 .62%
Director Minerals; Vice President, 1993/Bank
Lagomarsino's Inc.
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Gregory R. Morris President, 61 1998/Bancshares III 110,986(6) .46%
Director Morris & Garritano 1987/Bank
Insurance
(Insurance Agency)
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Carrol R. Pruett Chairman of the Board, 64 1998/Bancshares III 325,054(7) 1.35%
Chairman of the Board Mid-State Bancshares and 1967/Bank
Mid-State Bancshares Mid-State Bank & Trust.
President/Chief Executive
Officer of Mid-State Bank
& Trust (Retired in 2000)
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William L. Snelling Business Manager, 70 1998/Bancshares III 180,293(8) .75%
Director Consultant 1977/Bank
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(1) The address for all persons listed is c/o Mid-State Bancshares, 1026 Grand
Avenue, Arroyo Grande, California 93420.
(2) Service with Mid-State Bancshares, Mid-State Bank & Trust, or a bank, which
was acquired by merger by Mid-State Bank & Trust. (3) I-Term expiring in 2003;
II-Term expiring in 2004; and III-Term expiring in 2002.
(4) Except as otherwise noted, includes shares held by each person's spouse
(except where legally separated) and minor children; shares held by any other
relative of such person who has the same home; shares held by a family trust as
to which such person is a trustee with sole voting and investment power (or
shares power with a spouse); or shares held in an Individual Retirement Account
as to which such person has pass-through voting rights and investment power.
(5) Includes shares of common stock subject to stock option exercisable within
60 days.
(6) Includes 12,000 shares of common stock subject to stock option exercisable
within 60 days.
(7) Includes 105,488 shares of common stock subject to stock option exercisable
within 60 days.
(8) Includes 12,000 shares of common stock subject to stock option exercisable
within 60 days.
4
OTHER CURRENT DIRECTORS AND EXECUTIVE OFFICERS
Common Stock Beneficially
Owned On March 29, 2002
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Name, Address(9) Year First(10) Percentage of
and Relationship with the Elected or Shares
Company of Beneficial Principal Occupation for Appointed Director Number Outstanding
Owner Past Five Years Age Bancshares/Bank Term(11) of Shares(12) (13)
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Gracia B. Bello Registered Pharmacist 72 1998/Bancshares II 24,824(14) .10%
Director (Retired) 1996/Bank
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Trudi Carey Architect, Contractor, 45 2000/Bancshares I 9,240(15) .04%
Director Real Estate Broker 2000/Bank
The Carey Group, Inc.
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A. J. Diani Chairman of the Board, 80 1998/Bancshares II 187,176(16) .78%
Director A. J. Diani Construction 1977/Bank
Co., Inc., an engineering
and construction firm
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Daryl L. Flood Retired 68 1998/Bancshares II 202,114(17) .84%
Director 1978/Bank
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H. Edward Heron Vice President, 61 1999/Bancshares I 41,859(18) .17%
Director Coldwell Banker 1996/Bank
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Raymond E. Jones(19) Retired 1998/Bancshares
Director 74 1990/Bank III 125,066(20) .52%
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James W. Lokey President/Chief Executive 54 2000/Bancshares I 86,873(21) .36%
President/Chief Executive Officer, Mid-State Bank & 2000/Bank
Officer, Mid-State Trust 3/1/00 to present and
Bancshares and Mid-State Bancshares 6/1/01 to
Mid-State Bank & Trust present; President, Downey
Savings in 1997 and 1998
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Stephen P. Maguire President, Maguire 51 1999/Bancshares I 478,051(22) 1.98%
Director Investments, Inc. 1999/Bank
(Investment Firm)
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Thomas E. Reese Chief Credit Officer 57 - - 107,494(23) .45%
Executive Vice President Mid-State Bank & Trust
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James G. Stathos Chief Financial Officer, 56 - - 50,533(24) .21%
Executive Vice President Mid-State Bank & Trust and
Mid-State Bancshares 1998 to
present
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Directors and Executive 2,078,162(25) 8.62%
Officers as a group
(14 persons)
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(9) The address for all persons listed is c/o Mid-State Bancshares, 1026 Grand
Avenue, Arroyo Grande, California 93420.
(10) Service with Mid-State Bancshares, Mid-State Bank & Trust, or bank which
was acquired by merger by Mid-State Bank & Trust.
(11) I-Term expiring in 2003; II-Term expiring in 2004; and III-Term expiring in
2002.
(12) Except as otherwise noted, includes shares held by each person's spouse
(except where legally separated) and minor children; shares held by any othe
relative of such person who has the same home; shares held by a family trust as
to which such person is a trustee with sole voting and investment power (or
shares power with a spouse); or shares held in an Individual Retirement Account
as to which such person has pass-through voting rights and investment power.
(13) Includes shares of common stock subject to stock option exercisable within
60 days.
(14) Includes 12,000 shares of common stock subject to stock option exercisable
within 60 days.
(15) Includes 4,000 shares of common stock subject to stock option exercisable
within 60 days.
(16) Includes 12,000 shares of common stock subject to stock option exercisable
within 60 days.
(17) Includes 12,000 shares of common stock subject to stock option exercisable
within 60 days.
(18) Includes 8,000 shares of common stock subject to stock option exercisable
within 60 days.
(19) Mr. Jones' term expires May 16, 2002 and he is not standing for
re-election.
(20) Includes 12,000 shares of common stock subject to stock option exercisable
within 60 days.
(21) Includes 72,413 shares of common stock subject to stock option exercisable
within 60 days.
(22) Includes 8,000 shares of common stock subject to stock option exercisable
within 60 days.
(23) Includes 47,989 shares of common stock subject to stock option exercisable
within 60 days.
(24) Includes 47,989 shares of common stock subject to stock option exercisable
within 60 days.
(25) Includes 158,027 shares of common stock owned by the executive officers and
shares subject to stock option exercisable within 60 days.
5
None of the Bank's directors of Mid-State is a director of any other company
with a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or subject to the requirements of Section
15(d) of such Act or any company registered as an investment company under the
Investment Company Act of 1940.
The Board of Directors and Committees
The Audit Committee is composed of Director Morris (Chairman), Carey, Maguire
and Snelling. Each member is "independent," as defined by the Nasdaq listing
standards. The Audit Committee met five (5) times during 2001. Pursuant to its
Charter, the Audit Committee shall be a standing committee of Mid-State
appointed annually by the Board of Directors. The Committee will assist the
Board in fulfilling its responsibility to the shareholders and depositors
relating to the quality and integrity of Mid-State's accounting systems and
financial-reporting processes, the identification and assessment of business
risks and the adequacy of overall control environment within Mid-State. In so
doing, they will: (1) carry out their responsibilities in good faith and in an
informed and vigilant manner; (2) review recommendations and reports submitted
by the regulatory agencies, the Mid-State's external financial statement
auditors, management, and internal audit; (3) routinely report to the Board of
Directors, the Committee's activities and all matters of significance, making
recommendations for change as deemed advisable; (4) establish and maintain
contact with the regulatory agencies, the external financial statement auditors
and internal audit to satisfy themselves that: audit coverage is adequate,
appropriate programs are maintained, and activities are executed properly; (5)
discuss directly with management any issues of concern or interest to the
Committee; and (6) employ such resources in the performance of their duties,
including access to separate legal counsel and external consultants, as the
Committee deems necessary. A copy of the Audit Committee's Report for the year
ended December 31, 2001 is attached as Exhibit A to this Proxy Statement.
Mid-State has a standing Nominating Committee of which Directors Pruett
(Chairman), Bello, Flood and Heron are members. During the year ended December
31, 2001, the Nominating Committee held a total of one (1) meeting. The
Committee reviews information assembled for the purpose of selecting candidates
for nomination to membership on the Board. Following appropriate investigations,
it ascertains the willingness of selected candidates to serve and extends on
behalf of the Board, invitations to become candidates. Its recommendations are
presented to the Board at regularly scheduled meetings.
The Board also has a standing Compensation Committee of which Diani (Chairman),
Bello, Heron, Morris and Snelling (Alternate) are members. The primary function
of the Compensation Committee, which met four (4) times during 2001, is to
establish proper compensation ranges for officers and employees, delegate
certain authority to management regarding salary procedure, and determine
salaries for Mid-State officers depending upon experience, performance and
contribution to the success of Mid-State. A copy of the Compensation Committee's
Report for the year ended December 31, 2001 is attached as Exhibit B to this
Proxy Statement.
6
During the fiscal year ended December 31, 2001, the Board of Directors of
Mid-State held a total of sixteen (16) meetings. All of the persons who were
directors during 2001, attended at least 75% of the aggregate of, 1) the total
number of such meetings, and 2) the total number of meetings held by all
committees of the Board on which such director served during 2001.
Executive Compensation
The Board of Directors establishes the compensation awarded to the Executive
Officers, and determines the salaries of those executive officers based upon
their experience, performance, and contribution to the success of Mid-State. The
following table sets forth the aggregate compensation for services in all
capacities paid or accrued by Mid-State or its banking subsidiary to the five
most highly compensated persons who earned more than $100,000.00 in total salary
and bonus during 2001.
7
Summary Compensation Table
Annual Compensation Long-Term Compensation
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Other Annual Restricted # of Stock All Other
Name of Officer and Compensation Stock Options/ LT1P Compensation
Principal Position Year Salary Bonus (26) Awards SAR'S Payouts (27)
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James W. Lokey 2001 $300,000.00(28) $169,800.00(30) $0.00 $0.00 62,069 $0.00 $ 52,264.84
President, Chief 2000 $250,000.00(29) $250,000.00(31) $0.00 $0.00 150,000 $0.00 $ 51,919.60
Executive Officer 1999 $ 0.00 $ 0.00 $0.00 $0.00 0 $0.00 $ 0.00
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Thomas E. Reese 2001 $172,003.46(32) $ 99,044.35(35) $0.00 $0.00 24,138 $0.00 $ 17,464.24
Executive Vice 2000 $163,298.00(33) $ 0.00 $0.00 $0.00 0 $0.00 $221,488.15(36)
President/Chief 1999 $148,451.00(34) $ 0.00 $0.00 $0.00 50,000 $0.00 $213,571.33(37)
Credit Officer
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James G. Stathos 2001 $174,128.00(38) $ 99,268.80(41) $0.00 $0.00 24,138 $0.00 $ 16,532.94
Executive Vice 2000 $163,601.18(39) $ 0.00 $0.00 $0.00 0 $0.00 $221,521.81(42)
President/Chief 1999 $148,452.00(40) $ 0.00 $0.00 $0.00 50,000 $0.00 $205,323.22(43)
Financial Officer
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Steven L. Harding 2001 $147,650.98(44) $ 20,827.44 $0.00 $0.00 0 $0.00 $ 16,274.09
Senior Vice 2000 $113,229.93(45) $ 7,743.90 $0.00 $0.00 0 $0.00 $ 13,852.12
President/Corporate 1999 $ 99,595.08(46) $ 0.00 $0.00 $0.00 0 $0.00 $ 10,457.13
Banking Manager
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Leslie Sevier 2001 $188,808.23(47) $ 0.00 $0 $0.00 0 $0.00 $ 13,009.79
Mortgage Loan 2000 $165,375.22(48) $ 0.00 $0 $0.00 0 $0.00 $ 15,490.50
Officer 1999 $126,037.17(49) $ 0.00 $0 $0.00 0 $0.00 $ 23,315.65
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(26) No executive officer received perquisites or other personal benefits in
excess of the lesser of $50,000.00 or 10% of each officer's total annual salary
and bonus.
(27) Includes Mid-State contribution to defined contribution plans (qualified
and non-qualified, and whether or not vested).
(28) Includes $10,500.00 accrued in 2001 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(29) Includes $10,500.00 accrued in 2000 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(30) Bonus accrued in 2001 but payment deferred until 2002.
(31) Bonus accrued in 2000 but payment deferred until 2001.
(32) Includes $10,500.00 accrued in 2001 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(33) Includes $10,500.00 accrued in 2000 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(34) Includes $10,000.00 accrued in 1999 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(35) Bonus accrued in 2001 but payment deferred until 2002.
(36) Includes 2000 Deferred Compensation Contribution of $205,000.00.
(37) Includes 1999 Deferred Compensation Contribution of $207,490.00.
(38) Includes $10,500.00 accrued in 2001 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan")..
(39) Includes $10,000.00 accrued in 2000 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(40) Includes $10,000.00 accrued in 1999 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(41) Bonus accrued in 2001 but payment deferred until 2002.
(42) Includes 2000 Deferred Compensation Contribution of $205,000.00.
(43) Includes 1999 Deferred Compensation Contribution of $189,053.33.
(44) Includes $9,898.51 accrued in 2001 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(45) Includes $7,258.43 accrued in 2000 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(46) Includes $5,975.70 accrued in 1999 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(47) Salary is commissioned and, as a result, fluctuates depending on market
conditions and volume, and includes $10,500.00 accrued in 2001 but deferred
pursuant to Mid-State's 401(k) Plan (see "Profit Sharing 401(k) Plan").
(48) Salary is commissioned and, as a result, fluctuates depending on market
conditions and volume, and includes $10,500.00 accrued in 2000 but deferred
pursuant to Mid-State's 401(k) Plan (see "Profit Sharing 401(k) Plan").
(49) Salary is commissioned and, as a result, fluctuates depending on market
conditions and volume, and includes $10,000.00 accrued in 1999 but deferred
pursuant to Mid-State's 401(k) Plan (see "Profit Sharing 401(k) Plan").
8
Stock Options
Mid-State's 1996 Stock Option Plan (the "Stock Option Plan"), is intended to
advance the interests of Mid-State by encouraging stock ownership on the part of
key employees and non-employee directors. As of March 29, 2002, Mid-State had
options outstanding to purchase a total of 1,969,196 shares of its Common Stock
under the Stock Option Plan and 744,527 shares available for grant. Options
granted under the Plan become exercisable in accordance with a vesting schedule
established at the time of grant. Vesting may not extend beyond ten years from
the date of grant. Options become fully exercisable upon the sale, merger or
consolidation of Mid-State in which Mid-State is not the survivor
notwithstanding the vesting provisions under the Plan. Options granted under the
Plan are adjusted to protect against dilution in the event of certain changes in
Mid-State's capitalization, including stock splits and stock dividends. All
options granted have an exercise price equal to the fair market value of
Mid-State Stock on the date of grant.
Option Grants in 2001
Options granted during 2001 under the Stock Option Plan to any of the officers
set forth in the preceding table are as follows:
Individual Grants in 2001
Percent of
Number of Total Options Exercise or
Securities Underlying Granted to Base Price Expiration
Name Options Granted Employees in 2001 ($/Sh) Date
- -----------------------------------------------------------------------------------------------------------
James W. Lokey 62,069 14.8% $14.50 03/21/11
- -----------------------------------------------------------------------------------------------------------
Thomas E. Reese 24,138 5.7% $14.50 03/21/11
- -----------------------------------------------------------------------------------------------------------
James G. Stathos 24,138 5.7% $14.50 03/21/11
- -----------------------------------------------------------------------------------------------------------
Steven L. Harding 0 0% $0.00 0
- -----------------------------------------------------------------------------------------------------------
Leslie Sevier 0 0% $0.00 0
- -----------------------------------------------------------------------------------------------------------
9
Option/SAR Exercises and Year-End Value Table
The following table furnishes certain information regarding unexercised stock
options outstanding and stock options exercised under the Stock Option Plan for
the officers set forth in the Compensation Table:
Aggregated Option/SAR Exercises in Last Fiscal Year, and Fiscal Year-End
Option/SAR Value
Number of Securities
Shares Underlying Unexercised Value of
Acquired Options/SARs at FY-End In-the-Money Options/SARs
on Value Options/SARs at FY-End FY-End
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable(50)
- --------------------------------------------------------------------------------------------------------------------
James W. Lokey 0 0 72,413 Exercisable/ $158,895.14/
192,597 Unexercisable $293,587.68
- --------------------------------------------------------------------------------------------------------------------
Thomas E. Reese 0 0 47,898 Exercisable/ $139,673.67/
57,311 Unexercisable $ 40,613.58
- --------------------------------------------------------------------------------------------------------------------
James G. Stathos 0 0 47,989 Exercisable/ $139,673.67/
77,899 Unexercisable $ 40,613.58
- --------------------------------------------------------------------------------------------------------------------
Steven L. Harding 0 0 8,458 Exercisable/ $ 33,697.93/
4,000 Unexercisable $ 5,120.00
- --------------------------------------------------------------------------------------------------------------------
Leslie Sevier 0 0 0 Exercisable/ $ 0.00/
0 Unexercisable $ 0.00
- --------------------------------------------------------------------------------------------------------------------
Profit Sharing/401(k) Plan
Mid-State offers a combined Profit Sharing and 401(k) Plan to all of its
eligible employees, and those of its banking subsidiary ("Plan"). Eligible
employees may participate in the Plan at the next entry date following 90 days
of service. Employer contributions to the Profit Sharing and 401(k) Plan are
vested on a five-year vesting schedule at 20% per year.
Contributions to the Profit Sharing portion of the Plan ("Profit Sharing Plan")
are made entirely by Mid-State. Each year the Board of Directors, in its
discretion, decides how much money, if any, will be contributed to the Plan
depending on the amount of Mid-State's profits for the year. Mid-State's
contribution to the Profit Sharing Plan is allocated among all eligible
employees based on eligible pay. Employees must be actively employed at the end
of the calendar year in order to receive the profit sharing contribution. No
amounts are accrued or set aside for the account of non-employee directors.
Mid-State contributed approximately $1,504,145.00 to the Profit Sharing Plan for
the year ending December 31, 2001.
- ----------
(50) Unexercisable stock options represent those options granted, but not yet
fully vested. Exercisable stock options represent the fully vested portion.
Stock options vest at the rate of 20% per year from date of grant. Value of
options has been determined by multiplying number of shares by the difference
between the closing price on December 31, 2001 of $16.28 per share, and the
respective exercise price per share.
10
Under the 401(k) portion of the Plan ("401(k) Plan"), each covered employee can
make voluntary contributions to his or her account in an amount up to fifteen
percent (15%) of his or her base salary; such contributions vest immediately
when made. Mid-State makes a contribution to the employee's account in an amount
equal to fifty percent (50%) of the employee's contributions, up to a maximum of
six percent (6%) of the employee's salary. For the year ended December 31, 2001,
Mid-State contributed approximately $559,855.00 to the 401(k) Plan.
Change in Control Agreements
Mid-State entered into amended "change in control" agreements with Messrs.
Lokey, Reese, Stathos, and Harding as of January 9, 2002. Each of the agreements
for Messrs. Lokey, Reese and Stathos provides that, if a person who has acquired
control of Mid-State terminates the officer within 36 months after such change
in control other than for cause, disability or retirement (as such terms are
defined in the agreement) or if, within 36 months of such a change in control,
the officer terminates the agreement for good reason (as defined in the
agreement), the officer will receive (i) a lump sum severance payment equal to
three times his annual salary and bonus, (ii) continued benefits under all
insured and self-insured employee welfare benefit plans for a period ending on
the earliest of (A) three (3) years, (B) the commencement date of equivalent
benefits from a new employer or (C) the officer's normal retirement date under
the terms of such plans, and (iii) in the event that any payment or benefit
(within the meaning of Section 280G(b)(2) of the Internal Revenue Code, as
amended (the "Code")), to the officer or for his benefit paid or payable or
distributed or distributable pursuant to the terms of the agreement or otherwise
in connection with, or arising out of, his employment with Mid-State Bank &
Trust or a change in control (including accelerated exercise of any stock
options) (any such payment or benefit being a "Payment" or "Payments"), would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the officer with respect to such excise tax (such
excise tax, together with any such interest and penalties, are collectively
referred to as the "Excise Tax"), then the officer will be entitled to receive
an additional payment in an amount equal to (y) the total Excise Tax imposed on
the officer as a result of such Payments as well as (z) the total presumed
federal and state taxes due on such Excise Tax reimbursement. In general, a
"change in control" includes a change in the majority of directors as a result
of an election contest, an acquisition of 25% of the outstanding shares, a
merger, consolidation, sale of substantially all the assets, a change in the
majority of directors over a two (2) year period as well as any other transfer,
voluntarily or by hostile takeover or proxy contest, operation of law or
otherwise, of control of Mid-State or Mid-State Bank & Trust.
Mr. Harding's change in control agreement is issued under the same terms and
conditions with the exception that, if a person who has acquired control of
Mid-State terminates him within 24 months after such change in control he will
receive a lump sum severance payment equal to two times his annual salary and
bonus (as such terms are defined in the agreement).
Mr. Reese's change in control agreement will terminate upon his retirement on
May 1, 2002 and it is not currently anticipated that any payments will be due
thereunder.
11
Incentive Compensation Plan
In the first quarter of 2001, the Board of Directors approved an annual
Incentive Plan for the executive officers. The objective of the Incentive Plan
is to provide competitive compensation, warranted by performance, and aid in
motivating and retaining key executives. During 2001, Messrs. Lokey, Reese and
Stathos were eligible for participation in the Incentive Plan and their
respective compensation is set forth in the preceding Summary Compensation
Table.
Compensation of Directors
The Chairman of the Board received $2,500.00 per month and non-officer directors
received $2,000.00 per month for their service as directors and attendance at
Board meetings of which $1,000.00 was a monthly retainer payment. If they did
not attend a scheduled meeting, the director only received a $1,000.00 retainer
fee. Directors receive payment for various committee meetings attended in the
amount of $300.00 per meeting. Each Committee chairman receives a payment of
$450.00 per meeting attended. The total amount of fees paid to directors for
attendance at Board and Committee meetings during 2001 was $363,650.00. During
2001, Chairman Pruett received a stock option grant under the Stock Option Plan
to purchase 100,000 shares of Mid-State Stock. The options were granted at an
exercise price of $16.6250 per share, fully vested in five (5) years, and are
exercisable for ten (10) years.
Performance Graph
The following table and graph display six (6) year comparative total return
performance information for Mid-State Stock, the Standard and Poors 500 Index
(S&P 500), and NASDAQ Bank Index. The information is prepared assuming $100.00
is invested in each of the three (3) potential investments, six (6) years ago.
The performance information takes into account dividends paid and the price
appreciation or depreciation of the stock(s). It should be noted that historical
performance information is no guarantee of future performance.
12
- --------------------------------------------------------------------------------
Mid-State Bancshares
- --------------------------------------------------------------------------------
[THE FOLLOWING INFORMATION WAS ALSO REPRESENTED AS A LINE CHART IN THE PRINTED
MATERIAL]
Period Ending
----------------------------------------------------------------------
Index 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- -----------------------------------------------------------------------------------------------------
Mid-State Bancshares 100.00 194.92 204.10 236.31 269.41 252.90
S&P 500 100.00 133.37 171.44 207.52 188.62 166.22
NASDAQ Bank Index* 100.00 167.41 166.33 159.89 182.38 197.44
Transactions with Management and Others
There have been no transactions, or series of similar transactions, during 2001,
or any currently proposed transaction, or series of similar transactions, to
which Mid-State or its wholly owned bank subsidiary was or is to be a party, in
which the amount involved exceeded or will exceed $60,000.00 and in which any
director (or nominee for director) of Mid-State, executive officer of Mid-State,
any shareholder owning of record or beneficially 5% or more of Mid-State Stock,
or any member of the immediate family of any of the foregoing persons, had, or
will have, a direct or indirect material interest.
13
Indebtedness of Management
Some of the current directors and executive officers of Mid-State and the
companies with which they are associated have been customers of, and have had
banking transactions with Mid-State, in the ordinary course of Mid-State's
business, and Mid-State expects to continue to have such banking transactions in
the future. All loans and commitments to lend included in such transactions have
been made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
persons of similar creditworthiness, and in the opinion of management of
Mid-State, have not involved more than the normal risk of repayment or presented
any other unfavorable features.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires Mid-State's directors, executive
officers and ten percent (10%) or more shareholders of Mid-State's equity
securities to file with the SEC initial reports of ownership and reports of
changes of ownership of Mid-State's equity securities. Officers, directors and
ten percent (10%) or more shareholders are required by SEC regulations to
furnish Mid-State with copies of all Section 16(a) forms they file. To
Mid-State's knowledge, based solely on review of the copies of such reports
furnished to Mid-State and written representations that no other reports were
required, during the fiscal year ended December 31, 2001 all Section 16(a)
filing requirements applicable to its executive officers, directors and
beneficial owners of ten percent (10%) or more of Mid-State's equity securities
appear to have been met.
Relationship with Independent Public Accountants
Mid-State has not yet selected its independent public accountants for the fiscal
year ending December 31, 2002 but intends to do so later this year. Arthur
Andersen, LLP audited Mid-State's financial statements for the year ended
December 31, 2001 and have been Mid-State's accountants since 1979. It is
anticipated that a representative of Arthur Andersen, LLP will be present at the
Meeting and will be available to respond to appropriate questions from
shareholders regarding Mid-State's financial statements. All professional
services rendered by Arthur Andersen LLP during 2001 were furnished at customary
rates and terms.
Fees Paid to the Independent Auditors
For 2001, the Audit Committee considered and deemed the services provided by
Arthur Andersen LLP, the Mid-State's independent auditor, compatible with
maintaining the principle accountant's independence. During the fiscal year
ended December 31, 2001, fees paid to Arthur Andersen LLP consisted of the
following:
External Audit Fees
Audit fees billed to Mid-State by Arthur Andersen LLP during 2001 for review of
Mid-State's annual financial statements and those financial statements included
in quarterly reports on Form 10-Q totaled $240,000.00.
14
Audit Related Fees
Fees billed to Mid-State by Arthur Andersen LLP during 2001 for internal audits
conducted totaled $375,000.00, plus $71,500.00 for other audit related services.
Financial Information Systems Design and Implementation Fees
Arthur Andersen LLP did not bill Mid-State for any fees related to financial
information systems design and implementation during 2001.
All Other Fees
Fees billed to Mid-State by Arthur Andersen LLP during 2002 for all other
non-audit services including tax related services totaled $351,000.00.
PROPOSALS OF SHAREHOLDERS
Under certain circumstances, shareholders are entitled to present proposals at
shareholder meetings. Any such proposal to be included in the Proxy Statement
for Mid-State's 2003 Annual Meeting of Shareholders must be submitted by a
shareholder prior to December 20, 2002 in a form that complies with applicable
regulations.
ANNUAL REPORT TO SHAREHOLDERS AND FORM 10-K
Mid-State's Annual Report to Shareholders containing audited financial
statements and its Annual Report on Form 10-K is included in this mailing to
shareholders.
OTHER MATTERS
Mid-State does not know of any other matters than that described in this Proxy
Statement which will be presented for consideration at the Meeting. If any other
matter properly comes before the respective meetings or any and all adjournments
or postponements thereof, the proxy holders named on the accompanying proxies
will vote the shares requested by such proxies in accordance with their best
judgement and as in accordance with said proxies.
MID-STATE BANCSHARES
/s/ Raymond E. Jones
Arroyo Grande, California By: Raymond E. Jones
April 15, 2002 Secretary
15
EXHIBIT "A"
REPORT OF THE AUDIT COMMITTEE
The Audit Committee ("Committee") of the Board of Directors is composed of four
independent directors. The members of the Committee are: Directors Morris
(Chairman), Carey, Maguire and Snelling.
The Committee held five (5) meetings during 2001. During the course of the year,
the Committee reviewed its Charter, which was accepted by the Board of Directors
without change.
The Committee oversees the financial reporting process for Mid-State Bancshares
("Mid-State") on behalf of the Board of Directors. In fulfilling its oversight
responsibilities, the Committee reviewed the annual financial statements to be
included in the Annual Report and Form 10-K.
In accordance with Statements on Accounting Standards (SAS) No. 61, discussions
were held with management and the independent auditors regarding the
acceptability and the quality of the accounting principles used in the reports.
These discussions included the clarity of the disclosures made therein, the
underlying estimates and assumptions used in the financial reporting, and the
reasonableness of the significant judgments and management decisions made in
developing the financial statements. In addition, the Committee has discussed
with the independent auditors their independence from Mid-State and its
management, including the matters in the written disclosures required by the
Independence Standards Board Standard No. 1.
The Committee has also met and discussed with management and its independent
auditors, issues related to the overall scope and objectives of the audits
conducted, the internal controls used by Mid-State, and the selection of
Mid-State's independent auditors.
Pursuant to the reviews and discussions described above, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Annual Report on Form 10-K for the fiscal year ended December
31, 2001.
Signed and adopted by the Audit Committee this 29th day of March, 2002.
/s/ GREGORY R. MORRIS /s/ STEPHEN P. MAGUIRE
- ------------------------- ------------------------------
Committee Chairman Director/Committee Member
/s/ TRUDI G. CAREY /s/ WILLIAM L. SNELLING
- ------------------------- ------------------------------
Director/Committee Member Director/Committee Member
16
EXHIBIT "B"
REPORT OF THE COMPENSATION COMMITTEE
MID-STATE BANCSHARES AND MID-STATE BANK
The goals of the Mid-State Executive Compensation Program are to attract and
retain higher caliber executives, provide compensation in a cost efficient
manner, encourage executive ownership of Mid-State common stock and motivate
executives to maximize returns to shareholders, both annually and over the
long-term.
The philosophy of the Program is to provide a total reward program that supports
achievement of Mid-State's goals and objectives and provides total compensation
that is competitive in relation to that provided by comparable financial
institutions.
Compensation for Mid-State's executive officers includes the following
components:
o Salary - The principal objective of the salary program is to maintain
salaries that are targeted at the 75th percentile of the market for
comparable positions in similarly sized financial institutions.
o Annual incentives - Annual incentives are designed to reward principally
for overall annual Bank performance and provide total cash compensation
that is targeted at the 75th percentile of the market when warranted by
performance, and
o Long-term incentives - The principal objective of the long-term stock-based
incentive program is to align the financial interests of executives with
those of shareholders, provide incentive for executive ownership of
Mid-State common stock, support the achievement of long-term financial
objectives, and provide for long-term incentive reward and capital
accumulation opportunities.
o Benefits - The principal objectives of the benefits program provided for
executives are to provide attractive benefits to retain key executives and
provide financial planning opportunities to facilitate tax and estate
planning.
CEO Compensation
Mr. Carrol R. Pruett performed in the capacity of President and Chief Executive
Officer of Mid-State Bancshares until June 2001. At that point, Mr. James W.
Lokey was appointed to the position along with his responsibilities as President
and Chief Executive Officer of Mid-State Bank & Trust. Mr. Lokey's compensation
was developed in compliance with the Compensation Policy described above. In
setting the compensation for the CEO, the Compensation Committee made an overall
assessment of Mr. Lokey's leadership in achieving Mid-State's long-term
strategic and business goals, along with consideration of the competitive
business environment.
/s/ A. J. DIANI /s/ GREGORY R. MORRIS
- ------------------------------- ----------------------------------------
Committee Chairman Director/Committee Member
/s/ GRACIA B. BELLO /s/ WILLIAM L. SNELLING
- ------------------------------- ----------------------------------------
Director/Committee Member Director/Alternate Committee Member
/s/ H. EDWARD HERON
- -------------------------------
Director/Committee Member
17
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
Please mark
your votes as
indicated in |X|
this example
FOR
1. ELECTION OF DIRECTORS. To elect the following all nominees WITHHOLD
four (4) persons to the Board of Directors of listed to the left AUTHORITY
Mid-State to serve for a three (3) year term and until (except as to vote for all
their successors are elected and have qualified: marked to the nominees listed
contrary) to the left
01 Robert J. Lagomarsino |_| |_|
02 Gregory R. Morris
03 Carrol R. Pruett
04 William L. Snelling
A shareholder may withhold authority to vote for any nominee by lining through
or otherwise striking out the name of such nominee.
2. OTHER BUSINESS. To transact such other business as may properly come before
the Meeting and any adjournment or adjournments thereof.
The undersigned hereby acknowledges receipt of the Notice of Meeting, Proxy
Statement and Annual Report that accompanies this proxy and ratifies all lawful
actions taken by the above named proxies.
I (We) will |_| will not |_|
attend the Annual meeting in person.
Signature Signature Date
---------------------- -------------------------- ---------
NOTE: Please sign as name appears above. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
/\FOLD AND DETACH HERE/\
REVOCABLE PROXY o MID-STATE BANCSHARES
ANNUAL MEETING OF SHAREHOLDERS - MAY 16, 2002
The designated shareholder(s) of Mid-State Bancshares ("Mid-State") hereby
appoints, constitutes and nominates James W. Lokey, Raymond E. Jones and James
G. Stathos, and each of them, the attorney, agent and proxy of the undersigned,
with full power of substitution, to vote all shares of Mid-State which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be held
at the Cliffs Resort, 2757 Shell Beach Road, Shell Beach, California on
Thursday, May 16, 2002 at 7:30 p.m. local time, and any and all adjournments
thereof, as fully and with the same force and effect as the undersigned might or
could do if personally thereat, as indicated on the reverse side hereof.
This proxy confers authority and shall be voted in accordance with the
recommendation of the Board of Directors unless a contrary instruction is
indicated, in which case the proxy shall be voted in accordance with
instructions. If no instruction is specified, the shares represented by the
proxy will be voted in favor of the proposals listed on this proxy. In all other
matters, if any, properly presented at the annual meeting, the proxy shall be in
accordance with the judgement of the proxy holders. This proxy is solicited on
behalf of the Board of Directors and may be revoked prior to use.
- --------------------------------------------------------------------------------
/\FOLD AND DETACH HERE/\