SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
----------
MID-STATE BANCSHARES
(Name of Registrant as Specified in its Charter)
----------
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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:
[MID-STATE BANCSHARES LOGO]
1026 East Grand Avenue
Arroyo Grande, California 93420
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NOTICE OF 2003 ANNUAL MEETING
OF SHAREHOLDERS AND PROXY STATEMENT
MEETING DATE: MAY 15, 2003
[MID-STATE BANCSHARES LOGO]
991 Bennett Avenue, P.O. Box 580, Arroyo Grande, California 93421-0580
805/473-6829 o Fax 805/473-7752
April 15, 2003
Dear Shareholder:
We are pleased to invite you to the Annual Meeting of Shareholders to be held
on Thursday, May 15, 2003, at 7:30 P.M. at the Rancho Santa Barbara
Marriott-Santa Ynez Valley, 555 McMurray Road, Buellton, California. As we have
done in the past, in addition to considering the matters described in the Proxy
Statement, we will review major developments since our last Shareholders'
Meeting.
We hope that you will attend the Meeting in person; however, we strongly
encourage you to designate the proxies named on the enclosed Proxy Card to vote
your shares. This will ensure that your common stock is represented at the
Meeting. For the first time, you will also be able to vote by telephone or by
the Internet. The Proxy Statement explains more about these voting procedures.
Please read it carefully. Please note that the shareholders of Mid-State Bank,
BSM Bancorp, City Commerce Bank and Americorp who have not yet surrendered
their shares to be exchanged into Mid-State Bancshares common stock must sign,
date and mail the proxy card in the postage paid envelope that we have provided
to you (telephone and Internet voting are not available to those unexchanged
holders).
We look forward to your participation.
By Order of the Board of Directors,
/s/ James G. Stathos
James G. Stathos
Secretary
MID-STATE BANCSHARES
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 as follows:
Date: Thursday, May 15, 2003
Time: 7:30 p.m.
Place: Rancho Santa Barbara Marriott-Santa Ynez Valley
555 McMurray Road
Buellton, California
Matters to be voted on:
o 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 their
successors have been elected and have qualified. The Board of Directors has
nominated the following persons for election:
Trudi G. Carey
H. Edward Heron
James W. Lokey
Stephen P. Maguire
o Any other matters that may properly be brought before the meeting by order of
the Board of Directors
Only those shareholders of record at the close of business on March 31, 2003,
are entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
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, OR VOTE BY TELEPHONE OR
INTERNET, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO
ATTEND THE MEETING AND YOU WISH TO CHANGE YOUR VOTE, 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.
/s/ James G. Stathos
James G. Stathos
Secretary
April 15, 2003
Please vote promptly.
TABLE OF CONTENTS
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Proxy Statement .......................................................... 1
General Information About the Meeting .................................... 1
Proposal 1: Election of Directors ....................................... 3
About the Board and its Committees .......................... 7
Corporate Governance ........................................ 9
Compensation and Related Matters ............................ 10
Relationship with Independent Accountants ................................ 16
Shareholder Proposals and Nominations for the 2004 Annual Meeting ........ 17
Additional Information ................................................... 18
Appendix A: Audit Committee Report ....................................... 19
Appendix B: Compensation Committee Report ................................ 21
i
MID-STATE BANCSHARES
1026 East Grand Avenue
Arroyo Grande, CA 93420
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PROXY STATEMENT
Your vote is very important. For this reason, the Board of Directors is
requesting that you allow your common stock to be represented at the annual
meeting by the proxies named on the enclosed proxy card. This proxy statement is
being sent to you in connection with this request and has been prepared for the
Board by our management. "We," "our," or "Mid-State" refer to Mid-State
Bancshares. The proxy statement is being sent to our shareholders on or about
April 15, 2003.
GENERAL INFORMATION ABOUT THE MEETING
Who Can Vote. You are entitled to vote your Mid-State common stock if our
records showed that you held your shares as of March 31, 2003. At the close of
business on that date, a total of 23,488,310 shares of common stock were
outstanding and entitled to vote. Each share of Mid-State common stock has one
vote. The enclosed proxy card shows the number of shares that you are entitled
to vote. Your vote is confidential and will not be disclosed to persons other
than those recording the vote.
Voting Your Proxy. If your common stock is held by a broker, bank, or other
nominee, you will receive instructions from them that you must follow in order
to have your shares voted.
If you hold your shares in your own name as a holder of record, you may
instruct the proxies how to vote your common stock by using the toll free
telephone number or the Internet voting site listed on the proxy card or by
signing, dating, and mailing the proxy card in the postage paid envelope that we
have provided to you. Of course, you can always come to the meeting and vote
your shares in person. Specific instructions for using the telephone and
Internet voting systems are on the proxy card. The proxies will vote your shares
in accordance with those instructions. If you sign and return a proxy card
without giving specific voting instructions, your shares will be voted for the
election of directors named in this proxy statement.
Matters to be Presented. We are not now aware of any matters to be
presented other than those described in this proxy statement. If any matters not
described in the proxy statement are properly presented at the meeting, the
proxies will use their own judgment to determine how to vote your shares. If the
meeting is adjourned, the proxies can vote your common stock on the new meeting
date as well, unless you have revoked your proxy instructions.
1
Revoking your Proxy. To revoke your proxy instructions if you are a holder
of record, you must advise the Secretary in writing before the proxies vote your
common stock at the meeting, deliver later proxy instructions, or attend the
meeting and vote your shares in person. Unless you decide to attend the meeting
and vote your shares in person after you have submitted voting instructions to
the proxies, we recommend that you revoke or amend your prior instructions in
the same way you initially gave them - that is, by telephone, Internet, or in
writing. This will help to ensure that your shares are voted the way you have
finally determined you wish them to be voted.
How Votes are Counted. The annual meeting will be held if a majority of the
outstanding common stock entitled to vote is represented at the meeting. If you
have returned valid proxy instructions or attend the meeting in person, your
common stock will be counted for the purpose of determining whether there is a
quorum, even if you wish to abstain from voting on some or all matters
introduced at the meeting. If you hold your common stock through a nominee,
generally the nominee may vote the common stock that it holds for you only in
accordance with your instructions. Brokers who are members of the National
Association of Securities Dealers, Inc. may not vote shares held by them in a
nominee's name unless they are permitted to do so under applicable rules. Under
New York Stock Exchange rules, a member broker that has transmitted proxy
soliciting materials to a beneficial owner may vote on matters that the Exchange
has determined to be routine if the beneficial owner has not provided the broker
with voting instructions within 10 days of the meeting. If a nominee cannot vote
on a particular matter because it is not routine, there is a "broker non-vote"
on that matter. Broker non-votes count for quorum purposes, but we do not count
either abstentions or broker non-votes as votes for or against any proposal.
Cost of this Proxy Solicitation. We will pay the cost of this proxy
solicitation. In addition to soliciting proxies by mail, we expect that a number
of our employees will solicit shareholders for the same type of proxy,
personally and by telephone. None of these employees will receive any additional
or special compensation for doing this. We will, on request, reimburse brokers,
banks, and other nominees for their expenses in sending proxy materials to their
customers who are beneficial owners and obtaining their voting instructions.
Attending the Annual Meeting. If you are a holder of record and plan to
attend the annual meeting, please indicate this when you vote. The lower portion
of the proxy card is your admission ticket. If you are a beneficial owner of
common stock held by a broker, bank or other nominee, you will need proof of
ownership to be admitted to the meeting. A recent brokerage statement or a
letter from a bank or broker are examples of proof of ownership. If you want to
vote your common stock held in nominee name in person, you must get a written
proxy in your name from the broker, bank, or other nominee that holds your
shares.
2
PROPOSAL 1
ELECTION OF DIRECTORS
Our Bylaws and implementing resolutions provide for a total of ten (10)
directors. We have a "Classified" Board of Directors. A "Classified" Board means
that the directors are divided into three classes with staggered terms. As a
result, four (4) persons will be elected at the meeting to a term of three
years. At subsequent annual meetings of the 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.
Vote Required. Directors must be elected by a plurality of the votes cast
at the meeting. This means that the nominees receiving the greatest number of
votes will be elected. Votes withheld for any nominee will not be counted.
Substitute Nominees. Although we know of no reason why any of the nominees
would not be able to serve, if any nominee is unavailable for election, the
proxies would vote your common stock to approve the election of any substitute
nominee proposed by the Board of Directors. We may also choose to reduce the
number of directors to be elected, as permitted by our Bylaws.
3
Slate of Directors
[PHOTO OMITTED] Trudi G. Carey has been a director of Mid-State
Bancshares since 2000. She is president of The Carey
Group, a Santa Barbara firm that specializes in
architecture, planning, and construction administration.
She has been a licensed architect, real estate broker,
and general contractor practicing in the state of
California since 1978. Ms. Carey is a member of Mid-State
Bancshares' Compensation Committee and an alternate to
Mid-State Bancshares' Nominating Committee. She is an
alternate to Mid-State Bank & Trust's Board Loan
Committee.
[PHOTO OMITTED] H. Edward Heron has been a director of Mid-State
Bancshares since 1999 when we merged with City Commerce
Bank, where he was member of the board of directors. A
real estate broker for more than 35 years, Mr. Heron is
vice president and branch manager for Coldwell Banker in
Santa Barbara. He is an honorary director for life for
the California Association of Realtors. Mr. Heron is a
member of Mid-State Bancshares' Nominating Committee and
Compensation Committee and chairman of the Mid-State Bank
& Trust Foundation.
[PHOTO OMITTED] James W. Lokey has been president and chief executive
officer of Mid-State Bancshares since June 2001 and
Mid-State Bank & Trust since March 2000. During his
tenure, the Bank has added trust and investment
management services and a leasing department, and
acquired American Commercial Bank. He is a director for
the California Bankers Association and chairman of the
organization's e-commerce committee. Mr. Lokey is a
member of Mid-State Bancshares' Nominating Committee and
a member of Mid-State Bank & Trust's Board Loan Committee
and Trust Services Committee.
[PHOTO OMITTED] Stephen P. Maguire has been a director of Mid-State
Bancshares since 1999. He is an investment broker and
president of Maguire Investments, a regional securities
brokerage firm based in Santa Maria. He specializes in
wealth management and municipal bonds while overseeing
all aspects of the firm's operations. Mr. Maguire is
chairman of Mid-State Bank & Trust's Trust Services
Committee. He is an alternate member of Mid-State Bank &
Trust's Board Loan Committee.
4
General Information About the Nominees and the Continuing Directors. All of
the nominees are currently directors. Each has agreed to be named in this proxy
statement and to serve if elected. Each of the nominees and each of the
continuing directors was a director and attended at least 75% of the meetings of
the Board and committees on which they served in 2002.
Unless stated otherwise, all of the nominees and the continuing directors
have been continuously employed by their present employers for more than five
years. None of our directors is a director of any other company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 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 following tables set forth certain information, as of March 31, 2003,
with respect to the four (4) persons nominated by the Board of Directors for
election and six (6) continuing directors whose terms do not expire at the
meeting.
2003 Nominees
Common Stock Beneficially
Owned on March 31, 2003
---------------------------
Name, Address(1) Year First(2) Percentage of
and Relationship Elected or Shares
with the Company Principal Occupation Appointed Director Number of Outstanding
of Beneficial Owner for Past Five Years Age Bancshares/Bank Term(3) Shares(4) (5)
===========================================================================================================
===========================================================================================================
Trudi G. Carey Architect, Contractor, 46 2000/Bancshares I 13,740(6) .06%
Director Real Estate Broker 2000/Bank
The Carey Group, Inc.
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H. Edward Heron Vice President, 62 1999/Bancshares I 46,014(7) .20%
Director Coldwell Banker 1996/Bank
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James W. Lokey President/CEO, Mid- 55 2000/Bancshares I 141,000(8) .60%
President/Chief State Bank & Trust 2000/Bank
Executive Officer, 3/1/00 to present and
Mid-State Bancshares Mid-State Bancshares
and Mid-State Bank 6/1/01 to present;
& Trust President; Downey
Savings in 1997 and
1998
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Stephen P. Maguire President, Maguire 52 1999/Bancshares I 467,051(9) 1.99%
Director Investments, Inc. 1999/Bank
(Investment Firm)
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- --------------------------
(1) The address for all persons listed is c/o Mid-State Bancshares, 1026 East
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
2005.
(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 8,000 shares of common stock subject to stock option exercisable
within 60 days.
(7) Includes 12,000 shares of common stock subject to stock option exercisable
within 60 days.
(8) Includes 125,415 shares of common stock subject to stock options exercisable
within 60 days.
(9) Includes 12,000 shares of common stock subject to stock options exercisable
within 60 days.
5
Continuing Directors and Executive Officers
Common Stock Beneficially
Owned on March 31, 2003
---------------------------
Name, Address(10) Year First(11) Percentage of
and Relationship Elected or Shares
with the Company Principal Occupation Appointed Director Term Number of Outstanding
of Beneficial Owner for Past Five Years Age Bancshares/Bank (12) Shares(13) (14)
=============================================================================================================
=============================================================================================================
Gracia B. Bello Registered Pharmacist 73 1998/Bancshares II 28,724(15) .12%
Director (Retired) 1996/Bank
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Daryl L. Flood Retired 69 1998/Bancshares II 202,589(16) .86%
Director 1978/Bank
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Robert J. Lagomarsino President, 76 2001/Bancshares III 93,983(17) .40%
Director Lagomarsino 1993/Bank
Minerals; Vice
President,
Lagomarsino's, Inc.
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Gregory R. Morris President, 62 1998/Bancshares III 114,986(18) .49%
Director Morris & Garritano 1987/Bank
Insurance Agency
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Carrol R. Pruett Chairman of the 65 1998/Bancshares III 349,602(19) 1.49%
Chairman of the Board Board, Mid-State 1967/Bank
Bancshares and Mid-
State Bank & Trust.
President/Chief
Executive Officer,
Mid-State Bank &
Trust (Retired in 2000)
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William L. Snelling Business Manager, 71 1998/Bancshares III 184,293(20) .78%
Director Consultant 1977/Bank
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Harry H. Sackrider Chief Credit Officer, 58 -- -- 13,136(21) .06%
Senior Vice President, Mid-State Bank &
Mid-State Bancshares Trust
and Executive Vice
President/Chief Credit
Officer, Mid-State
Bank & Trust
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James G. Stathos Chief Financial 57 -- -- 73,669(22) .31%
Executive Vice Officer, Mid-State
President/Chief Bank & Trust and
Financial Officer, Mid- Mid-State Bancshares
State Bancshares and 1998 to present
Mid-State Bank & Trust
- -------------------------------------------------------------------------------------------------------------
Directors and 1,728,787(23) 7.36%
Executive Officers as a
group (12 persons)
- -------------------------------------------------------------------------------------------------------------
- --------------------------
(10) The address for all persons listed is c/o Mid-State Bancshares, 1026 East
Grand Avenue, Arroyo Grande, California 93420.
(11) Service with Mid-State Bancshares, Mid-State Bank & Trust, or a bank, which
was acquired by merger by Mid-State Bank & Trust.
(12) I-Term expiring in 2003; II-Term expiring in 2004; and III-Term expiring in
2005.
(13) 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.
(14) Includes shares of common stock subject to stock option exercisable within
60 days
(15) Includes 16,000 shares of common stock subject to stock option exercisable
within 60 days.
(16) Includes 16,000 shares of common stock subject to stock option exercisable
within 60 days.
(17) Includes 4,000 shares of common stock subject to stock option exercisable
within 60 days.
(18) Includes 68,508 shares held by Mr. Morris as Trustee for Morris & Garritano
Profit Sharing Trust, as to which Mr. Morris has sole voting and investment
power; and 16,000 shares of common stock subject to stock option exercisable
within 60 days.
(19) Includes 149,488 shares of common stock subject to stock options
exercisable within 60 days.
(20) Includes 16,000 shares of common stock subject to stock options exercisable
within 60 days.
(21) Includes 9,800 shares of common stock subject to stock options exercisable
within 60 days.
(22) Includes 70,934 shares of common stock subject to stock options exercisable
within 60 days.
(23) Includes 86,805 shares of common stock owned by the executive officers and
shares subject to stock options exercisable within 60 days.
6
ABOUT THE BOARD AND ITS COMMITTEES
The Board. Mid-State is governed by a Board of Directors and various
committees of the Board that meet throughout the year. Directors discharge their
responsibilities throughout the year at Board and committee meetings and also
through telephone contact and other communications with the Chairman and Chief
Executive Officer and others regarding matters of concern and interest to
Mid-State. During 2003, there were fifteen (15) meetings of the Board.
Committees. Among other committees, Mid-State has audit, nominating and
corporate governance and compensation committees. The following describes for
each of these three committees its current membership, the number of meetings
held during 2002, and its function.
Audit. Directors Snelling (Chairman), Bello and Flood.
This Committee met six (6) times in 2002. Each member is "independent," as
defined by the Nasdaq listing standards. Pursuant to its Charter, the Audit
Committee is a standing committee appointed annually by the Board of Directors.
The Committee assists the Board of Directors in fulfilling its responsibility to
the shareholders and depositors relating to the quality and integrity of our
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:
o Carry out their responsibilities in good faith and in an informed and
vigilant manner;
o Review recommendations and reports submitted by the regulatory
agencies, our external financial statement auditors, management, and
Internal Audit;
o Routinely report to the Board of Directors, the Committee's activities
and all matters of significance, making recommendations for change as
deemed advisable;
o 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;
o Discuss directly with management any issues of concern or interest to
the Committee; and
o Employ such resources in the performance of their duties, including
access to separate legal counsel and external consultants, as the
Committee deems necessary.
7
A copy of the Audit Committee's Report for the year ended December 31, 2002
is attached as Appendix A to this proxy statement. The Audit Committee's Charter
was attached to our proxy statement for the 2001 meeting of shareholders. As
discussed below in "CORPORATE GOVERNANCE," the Charter is in the process of
being amended. We will attach the amended Charter to our proxy statement for the
2004 meeting of shareholders
Nominating and Corporate Governance Committee. Directors Pruett (Chairman),
Lokey, Bello, Heron, Lagomarsino, Carey (Alternate Member), and Flood (Alternate
Member).
This committee met one (1) time in 2002. The committee:
o Reviews information assembled for the purpose of selecting candidates
for nomination to membership on the Board of Directors;
o Following appropriate investigations, ascertains the willingness of
selected candidates to serve and extends on behalf of the Board of
Directors, invitations to become candidates; and
o Presents recommendations to the Board of Directors at regularly
scheduled meetings.
Compensation. Directors Morris (Chairman), Bello, Carey, Heron, and
Snelling (Alternate Member)
This committee met four (4) times in 2002. The committee:
o Establishes proper compensation ranges for officers and employees;
o Delegates certain authority to management regarding salary procedure;
and
o Determines 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, 2002 is attached as Appendix B to this proxy statement.
Compensation Committee Interlocks and Insider Participation. No members of
the Compensation Committee were officers or employees of Mid-State or its
subsidiary during the year or were formerly Mid-State officers. The Chairman of
the Compensation Committee during 2002, Director Gregory R. Morris, is the
president and principal owner/stockholder of Morris & Garritano Insurance
Agency. Morris & Garritano received broker commissions during 2002 in connection
with the placement of insurance for Mid-State and its subsidiary. Such broker
commissions were less than 5% of Morris & Garritano's gross revenues for 2002.
8
CORPORATE GOVERNANCE
We have a strong commitment to good corporate governance and to the highest
standards of ethical conduct.
Corporate governance received a heightened degree of focus from our Board
of Directors and management during 2002. On July 30, 2002, President Bush signed
into law the Sarbanes-Oxley Act of 2002 (the "SOA"). The SOA includes very
specific additional disclosure requirements and new corporate governance rules,
requires the Securities and Exchange Commission (the "SEC") and securities
exchanges to adopt extensive additional disclosure, corporate governance and
other related rules and mandates further studies of certain issues by the SEC.
We have taken all required actions to comply with all the currently applicable
provisions of the SOA and implementing regulations. Additionally, we continue to
monitor regulations and rules proposed by the SEC and Nasdaq (our common stock
is listed on the Nasdaq national market) relating to these matters and to plan
for their implementation.
During 2002, we took a series of steps to review and improve our existing
corporate governance practices. These steps included:
o A review of the composition of our Board of Directors to determine
that we continue to have at least a majority of our directors that are
independent, non-employee directors. We believe that at Mid-State Bank
& Trust this has been the case since at least 1961 and has been the
case for Mid-State Bancshares since it was formed in 1998.
o The nominating committee was combined and changed to the nominating
and corporate governance committee. The committee, among other things,
develops and recommends corporate governance principles applicable to
Mid-State, including those concerning the size and composition of the
Board, reviews potential candidates for board membership and
recommends nominees to the Board.
o A review of our audit committee composition to assure that all current
members meet both the existing as well as the proposed criteria for
independence.
o The preparation of a draft of a revised audit committee charter which
would, among other things, provide the committee with authority to (i)
control directly the outside auditor, (ii) make hiring and termination
decisions concerning the auditor, and (iii) approve all non-audit
services. We expect that the revised charter will be adopted shortly
after the completion of final rule making by the SEC and Nasdaq
concerning these issues.
9
o The adoption of a code of conduct for our Chief Executive Officer and
Chief Financial Officer as required by the SOA. This code has been
included as part of our corporate code of ethics which has been in
place since at least 1997.
o Our Chief Executive Officer and Chief Financial Officer have begun
certifying all quarterly and annual financial reports which we file
with the SEC.
o We have completed a review of our internal controls and our disclosure
controls and procedures to ensure that we provide complete and
accurate disclosures in our SEC filings and other public reports. We
merged our existing Risk Committee into a new Risk/Disclosure
Committee. In addition to assessing various risks impacting Mid-State,
this committee is made up of senior company officers knowledgeable of
our affairs and of disclosure-related regulation. The committee is
chaired by our chief financial officer and membership consists of our
CEO, chief credit officer, corporate controller, and key senior
members of Bank management. The committee convenes as necessary to
review and decide upon the appropriate disclosure, if any, of
potentially material events or change in the risk profile regarding
Mid-State that come to the attention of any member of the committee,
and to review and approve all earnings releases and other SEC filings,
making sure that those filings are properly recorded, processed, and
summarized. The committee seeks the advice of counsel and our
independent audit firm in its deliberations.
o The implementation of a plan to post promptly our annual, quarterly
and current reports to the SEC on our website at www.midstatebank.com.
We have been posting some of these reports for sometime. We also
anticipate beginning to post the ownership reports of our directors,
executive officers and principal shareholders to the website,
beginning in June 2003.
o During 2002, in conjunction with the change in accounting firms from
Arthur Andersen LLP to PricewaterhouseCoopers LLP ("PWC"), the Company
also considered several proposals to provide internal audit services.
After review, the internal audit function was awarded to the firm,
Protiviti, a risk management firm, independent from PWC.
COMPENSATION AND RELATED MATTERS
Compensation. The compensation committee 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 (5) most highly compensated persons who earned
more than $100,000.00 in total salary and bonus during 2002.
10
Summary Compensation Table
Long-Term Compensation
---------------------------------
Annual Compensation Awards Payouts
------------------------------------- ----------------------- -------
Restricted Securities
Other Annual Stock Underlying LT1P** All Other
Name and Salary Bonus Compensation Award(s) Options/ Payouts Compensation
Principal Position Year ($) ($) ($)(24) ($) SARs* (#) ($) ($)(25)
=====================================================================================================================
James W. Lokey 2002 341,670(26) 175,000(29) 0 0 52,941 0 21,247
President/Chief 2001 300,000(27) 169,800(30) 0 0 62,069 0 52,265
Executive Officer 2000 250,000(28) 250,000(31) 0 0 150,000 0 51,920
- ---------------------------------------------------------------------------------------------------------------------
James G. Stathos 2002 216,668(32) 112,500(35) 0 0 20,588 0 25,786
Executive Vice 2001 174,128(33) 99,268(36) 0 0 24,138 0 16,533
President/Chief 2000 163,601(34) 0 0 0 0 0 221,522(37)
Financial Officer
- ---------------------------------------------------------------------------------------------------------------------
Harry H. Sackrider 2002 134,585(38) 89,580(41) 0 0 20,000 0 14,847
Executive Vice 2001 96,831(39) 12,675(42) 0 0 0 0 11,537
President/Chief 2000 82,842(40) 5,735(43) 0 0 10,000 0 10,596
Credit Officer
- ---------------------------------------------------------------------------------------------------------------------
Steven L. Harding 2002 150,000(44) 25,226(47) 0 0 0 0 20,477
Senior Vice 2001 147,651(45) 20,827 0 0 0 0 16,274
President/ 2000 113,230(46) 7,744 0 0 0 0 13,852
Corporate Banking
Manager
- ---------------------------------------------------------------------------------------------------------------------
Daniel Eliot 2002 150,000(48) 28,490(49) 0 0 5,000 0 29,968
Senior Vice 2001 23,846 0 0 0 10,000 0 360
President/ 2000 0 0 0 0 0 0 0
Corporate Banking
Manager
- ---------------------------------------------------------------------------------------------------------------------
* SAR stands for "Stock Appreciation Rights" and refers to SARs payable in cash
or stock, including SARs payable in cash or stock of the election of the Company
or a named executive officer.
** LT1P stands for "Long-Term Incentive Plan" and refers to any plan providing
compensation intended to serve as an incentive for performance to occur over a
period longer than one fiscal year, whether such performance is measured by
reference to financial performance of the Company or an affiliate, the Company's
stock price, or any other measure, but excluding restricted stock, stock option
and SAR Plans.
- --------------------------
(24) No executive officer received perquisites or other personal benefits in
excess of the lesser of $50,000 or 10% of each officer's total annual salary and
bonus.
(25) Includes Mid-State contribution to defined contribution plans (qualified
and non-qualified, and whether or not vested).
(26) Includes $11,000 accrued in 2002 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(27) Includes $10,500 accrued in 2001 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(28) Includes $10,500 accrued in 2000 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(29) Bonus accrued in 2002 but payment deferred until 2003.
(30) Bonus accrued in 2001 but payment deferred until 2002.
(31) Bonus accrued in 2000 but payment deferred until 2001.
(32) Includes $12,000 accrued in 2002 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(33) Includes $10,500 accrued in 2001 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(34) Includes $10,500 accrued in 2000 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(35) Bonus accrued in 2002 but payment deferred until 2003.
(36) Bonus accrued in 2001 but payment deferred until 2002.
(37) Includes 2000 Deferred Compensation Contribution of $205,000.
(38) Includes $12,000 accrued in 2002 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(39) Includes $8,939 accrued in 2001 but deferred pursuant to Mid-State's 401(k)
Plan (see "Profit Sharing 401(k) Plan").
(40) Includes $5,315 accrued in 2000 but deferred pursuant to Mid-State's 401(k)
Plan (see "Profit Sharing 401(k) Plan").
(41) Bonus of $14,580 accrued in 2001 but payment deferred until 2002, and
$75,000.00 accrued in 2002 but payment deferred until 2003.
(42) Bonus accrued in 2000 but payment deferred until 2001.
(43) Bonus accrued in 1999 but payment deferred until 2000.
(44) Includes $10,423 accrued in 2002 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(45) Includes $9,899 accrued in 2001 but deferred pursuant to Mid-State's 401(k)
Plan (see "Profit Sharing 401(k) Plan").
(46) Includes $7,258 accrued in 2000 but deferred pursuant to Mid-State's 401(k)
Plan (see "Profit Sharing 401(k) Plan").
(47) Bonus accrued in 2002 but payment deferred until 2003.
(48) Includes $11,000 accrued in 2002 but deferred pursuant to Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan").
(49) Bonus of $3,740 accrued in 2001 but payment deferred until 2002, and
$24,750 accrued in 2002 but payment deferred until 2003.
11
Stock Options. Our 1996 Stock Option Plan (the "Stock Option Plan") is
intended to advance our interests by encouraging stock ownership on the part of
key employees and non-employee directors. As of March 31, 2003, we had options
outstanding to purchase a total of 2,027,214 shares of our common stock under
the Stock Option Plan and 606,425 shares available for grant.
The following table furnishes certain information regarding stock options
granted under the Stock Option Plan for James W. Lokey, James G. Stathos, Harry
H. Sackrider, Steven L. Harding, and Daniel Eliot.
Options/SAR Grants In 2002
- ---------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price
Appreciation for
Individual Grants Option Term
- ---------------------------------------------------------------------------------------------------
Percent of
Number of Total
Securities Options/
Underlying SARs
Options/SARs Granted to Exercise or
Granted Employees in Base Price Expiration 5% 10%
Name (#) 2002 ($/Sh) Date ($) ($)
===================================================================================================
James W. Lokey 52,941 22.19% $17.40 03/13/2012 579,321 1,468,113
- ---------------------------------------------------------------------------------------------------
James G. Stathos 20,588 8.63% $17.40 03/13/2012 225,290 570,928
- ---------------------------------------------------------------------------------------------------
Harry H. Sackrider 5,000 2.10% $17.40 03/13/2012 54,714 138,656
- ---------------------------------------------------------------------------------------------------
Harry H. Sackrider 15,000 6.29% $17.00 12/11/2012 160,368 406,404
- ---------------------------------------------------------------------------------------------------
Steven L. Harding 0 0% 0 0 0 0
- ---------------------------------------------------------------------------------------------------
Daniel Eliot 5,000 2.10% $17.40 03/13/2012 54,714 138,656
- ---------------------------------------------------------------------------------------------------
12
Aggregated Option/SAR Exercises in 2002
and Fiscal Year-End Option/SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at 03/31/2003 at 03/31/2003
(#) ($)(50)
--------------------------- ---------------------------
Shares
Acquired on Value
Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
======================================================================================================
James W. Lokey 0 0 125,415 202,545 298,768 244,905
- ------------------------------------------------------------------------------------------------------
James G. Stathos 0 0 70,934 81,932 167,219 36,847
- ------------------------------------------------------------------------------------------------------
Harry H. Sackrider 0 0 9,800 44,185 14,808 11,952
- ------------------------------------------------------------------------------------------------------
Steven L. Harding 0 0 10,458 12,000 40,755 3,420
- ------------------------------------------------------------------------------------------------------
Daniel Eliot 0 0 3,000 17,000 1,080 4,320
- ------------------------------------------------------------------------------------------------------
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 (the "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 (the "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 $1,659,000 to the Profit Sharing Plan for
the year ending December 31, 2002.
Under the 401(k) portion of the Plan (the "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, 2002, Mid-State contributed approximately $632,000 to the 401(k)
Plan.
- --------------------------
(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 the date of grant. Value of
options has been determined by multiplying number of shares by the difference
between the closing price on December 31, 2002 of $16.42 per share, and the
respective exercise price per share.
13
Change in Control Agreements. Mid-State entered into "change in control"
agreements with Messrs. Lokey, Sackrider, and Stathos as of January 9, 2002.
Each agreement 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 and (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. 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.
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 plan is to provide competitive compensation, warranted by
performance, and aid in motivating and retaining key executives. Messrs Lokey,
Stathos and Sackrider are eligible for participation in the Plan.
Other Compensation. We have provided and plan to continue to provide our
executive officers with automobiles, which are not available to all our
employees. It is impracticable to estimate the percentage of the total costs of
these benefits attributable to personal use. No amount is stated for the
foregoing in the compensation table on page 11, since management has concluded
that the amount of any personal benefits to any executive officer and to the
principal officers as a group is less than the lesser of $50,000.00 per person
or ten percent (10%) of the compensation reported under "Cash Compensation" for
each such person and for the group.
Compensation of Directors. Directors who are also officers of the Company
do not receive additional compensation for their services as directors. During
2002, the Company's non-employee directors received a $12,000 annual retainer
and $1,000 for each regular and special meeting attended. The Chairman of the
Board received $1,500 for meetings attended. Members of the committees received
$300 for each committee meeting attended, while committee chairpersons received
$450 per meeting attended. Directors are also reimbursed for any out-of-pocket
expenses incurred during their duties as directors. Total fees paid to directors
in 2002 were $372,950.
During 2002, Director Lagomarsino received a stock option grant under the
Stock Option Plan to purchase 20,000 shares of Mid-State Stock. The option was
granted at an exercise price of $15.95 per share, fully vested in five (5)
years, and are exercisable for ten (10) years.
14
Performance Graph. The following table and graph display six (6) year
comparative total return performance information for Mid-State common 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.
- --------------------------------------------------------------------------------
Mid-State Bancshares
================================================================================
[LINE CHART OMITTED]
Period Ending
----------------------------------------------------------
Index 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
- --------------------------------------------------------------------------------
Mid-State Bancshares 100.00 104.71 121.23 138.21 129.75 133.92
S&P 500 100.00 128.55 155.60 141.42 124.63 96.95
NASDAQ Bank Index* 100.00 99.36 95.51 108.95 117.97 120.81
Transactions with Management and Others. There have been no transactions,
or series of similar transactions, during 2002, 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.
15
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.
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, 2002 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 except, during the
transition period to electronic filings from the standard paper filings as
provided by SOA, there were several instances where the filings did not meet the
new requirements. In those cases, the reports were filed late with all necessary
disclosures.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Background. On May 14, 2002, we terminated our engagement of Arthur
Andersen LLP ("Andersen") as our independent auditor. Andersen's report on our
financial statements for each of the years ended December 31, 2001 and 2000 did
not contain an adverse opinion or a disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting principles. With the
difficulties experienced by Andersen, the Audit Committee decided that it could
not retain its services in 2002. With the termination of our former independent
accounting firm, an extensive evaluation process was conducted by the Board of
Directors, the Audit Committee, and our management. We announced on July 12,
2002 the appointment of Pricewater-houseCoopers LLP ("PWC") as our new
independent accounting firm.
It is anticipated that a representative of PWC will be present at the
meeting and will be available to respond to appropriate questions from
shareholders regarding the Company's financial statements.
16
Fees. All professional services rendered by PWC during 2002 were furnished
at customary rates and terms. For 2002, the Audit Committee considered and
deemed the services provided by PWC compatible with maintaining the principle
accountant's independence.
The following table presents fees for professional audit services rendered
by PWC for the audit of our annual consolidated financial statements for the
fiscal year ended December 31, 2002, and fees billed for other services provided
by PWC during 2002.
Audit fees $230,000
Audit related fees(51) 3,500
--------
Audit and audit related fees 233,500
Tax fees(52) 84,900
All other fees 0
--------
Total fees $318,400
========
In addition, the Company paid $17,500 to Andersen for audit and tax related
services for the fiscal year ended December 31, 2002, prior to their termination
on May 14, 2002.
SHAREHOLDER PROPOSALS AND NOMINATIONS
FOR THE 2004 ANNUAL MEETING
Proxy Statement Proposals. Under the rules of the SEC, proposals that
shareholders seek to have included in the proxy statement for our next annual
meeting of shareholders must be received by the Secretary of Mid-State not later
than December 19, 2003.
Other Proposals and Nominations. Our Bylaws govern the submission of
nominations for director or other business proposals that a stockholder wishes
to have considered at a meeting of shareholders, but which are not included in
Mid-State's proxy statement for that meeting. Nominations for director must be
made in accordance with Section 2.11 of our Bylaws, which is set forth in the
notice of the meeting attached to this proxy statement.
- --------------------------
(51) Consulting services provided by PWC during 2002.
(52) Tax services provided by PWC during 2002.
17
ADDITIONAL INFORMATION
Under the Securities Exchange Act of 1934 Sections 13 and 15(d), periodic
and current reports must be filed with the SEC. We electronically file the
following reports with the SEC: Form 10-K (Annual Report), Form 10-Q (Quarterly
Report), Form 11-K (Annual Report for Employees' Stock Purchase and Savings
Plans), Form 8-K (Report of Unscheduled Material Events), and Form DEF 14A
(Proxy Statement). We may file additional forms. The SEC maintains an Internet
site, www.sec.gov, in which all forms filed electronically may be accessed.
Additionally, all forms filed with the SEC and additional shareholder
information is available free of charge on our website: www.midstatebank.com. We
post these reports to our website as soon as reasonably practicable after filing
them with the SEC. None of the information on or hyperlinked from our website is
incorporated into this proxy statement.
/s/ James G. Stathos
James G. Stathos
Secretary
18
APPENDIX "A"
REPORT OF THE AUDIT COMMITTEE
The Audit Committee ("Committee") of the Board of Directors is composed of
three independent directors. The members of the Committee are: Directors
Snelling (Chairman), Bello and Flood.
The Committee held six (6) meetings during 2002. During the course of the
year, the Committee reviewed drafts of a revised Audit Committee Charter which
would, among other things, provide the Committee with authority to (i) control
directly the outside auditor, (ii) make hiring and termination decisions
concerning the auditor, and (iii) approve all non-audit services. The Committee
expects that the revised Charter will be adopted shortly after the completion of
final rule making by the SEC and Nasdaq concerning these issues.
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
audit 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, 2002.
19
Signed and adopted by the Audit Committee this 24th day of March, 2003.
/s/ William L. Snelling
- ---------------------------------
Committee Chairman
/s/ Gracia B. Bello
- ---------------------------------
Director/Committee Member
/s/ Daryl L. Flood
- ---------------------------------
Director/Committee Member
20
APPENDIX "B"
REPORT OF THE COMPENSATION COMMITTEE
MID-STATE BANCSHARES AND MID-STATE BANK
The goals of the Mid-State Executive Compensation Program (the "Program")
are to attract and retain higher caliber executives, provide compensation in a
cost efficient manner, encourage executive ownership of Mid-State Bancshares
("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.
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
In setting the Chief Executive Officer's (the "CEO") base salary and in
determining his performance bonus for fiscal 2002 the Compensation Committee
(the "Committee") has considered Mid-State's sustained revenue and profit growth
in recent years. In addition, the Bank continues to perform in the upper
quartile of the industry peer group. The CEO significantly contributed to this
success. Based on this performance, the Committee approved a salary increase and
cash bonus. The stock option grant made to the CEO was made at the fair market
value. All of the adjustments were made in accordance with the guidelines
established in the executive compensation plan.
21
It is the opinion of the Committee that the aforementioned compensation policies
and structures provide the necessary discipline to properly align Mid-State's
corporate objectives and the interests of our shareholders with competitive
compensation practices in an equitable manner.
Signed and adopted by the Compensation Committee this 18th day of February,
2003.
/s/ Gregory R. Morris
- ---------------------------------
Committee Chairman
/s/ Gracia B. Bello
- ---------------------------------
Director/Committee Member
/s/ Trudi G. Carey
- ---------------------------------
Director/Committee Member
/s/ H. Edward Heron
- ---------------------------------
Director/Committee Member
/s/ William L. Snelling
- ---------------------------------
Director/Alternate Member
22
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS. Please
Mark Here
for Address | |
Change or
Comments
SEE REVERSE SIDE
1. ELECTION OF DIRECTORS. To elect the following four (4) 2. OTHER BUSINESS. To transact such other business as may
persons to the Board of Directors of Mid-State to serve for properly come before the Meeting and any adjournment or
a three (3) year term and until their successors are adjournments thereof.
elected and have qualified:
FOR all WITHHOLD The undersigned hereby acknowledges receipt of the Notice of
nominees listed AUTHORITY Meeting, Proxy Statement and Annual Report that accompanies this
(except as marked to to vote for all proxy and ratifies all lawful actions taken by the above named
the contrary) nominees listed proxies.
01 Trudi G. Carey | | | |
02 H. Edward Heron | | | | I (We) will |_| will not |_|
03 James W. Lokey Attend the Annual meeting in person.
04 Stephen P. Maguire
A shareholder may withhold authority to vote for any nominee by
lining through or otherwise striking out the name of such
nominee.
Please sign exactly as your name appears on this Voting
Form. If shares are registered in more than one name, the
signatures of all such persons are required. A corporation
should sign in its full corporate name by a duly authorized
officer, stating such officer's title. Trustees, guardians,
executors and administrators should sign in their official
capacity giving their full title as such. A partnership
should sign in the partnership name by an authorized
person, stating such person's title and relationship to the
partnership.
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 ^
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11PM Eastern Time
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
- ---------------------------------------- ---------------------------------------- ----------------------------------------
Internet Telephone Mail
http://www.eproxy.com/mdst 1-800-435-6710
Use the Internet to vote your proxy. Use any touch-tone telephone to vote Mark, sign and date
Have your proxy card in hand when you your proxy. Have your proxy card in hand your proxy card
access the web site. You will be OR when you call. You will be prompted to OR and
prompted to enter your control number, enter your control number, located in return it in the
located in the box below, to create and the box below, and then follow the enclosed postage-paid
submit an electronic ballot. directions given. envelope.
- ---------------------------------------- ---------------------------------------- ----------------------------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
REVOCABLE PROXY o MID-STATE BANCSHARES
ANNUAL MEETING OF SHAREHOLDERS - MAY 15, 2003
The designated shareholder(s) of Mid-State Bancshares ("Mid-State") hereby
appoints, constitutes and nominates Carrol R. Pruett 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 Rancho
Santa Barbara Marriott Santa Ynez Valley, 555 McMurray Road, Buellton,
California, on Thursday, May 15, 2003 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 discretionary 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 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.
(Continued and to be marked, dated and signed, on the other side)
- --------------------------------------------------------------------------------
Address Change/Comments (Mark the corresponding box on the reverse side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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^ FOLD AND DETACH HERE ^
BRING THIS ADMISSION TICKET WITH YOU TO THE MEETING ON MAY 15, 2003.
DO NOT MAIL.
This admission ticket admits you to the meeting. You will not be let in to the
meeting without an admission ticket or other proof of stock ownership as of
March 31, 2003, the record date.
ADMISSION TICKET
[MID-STATE BANCSHARE LOGO]
2003 Annual Shareholders Meeting
Thursday, May 15, 2003
7:30 p.m.
Rancho Santa Barbara Marriott-Santa Ynez
555 McMurray Road
Buellton, California 93427
NON-TRANSFERABLE NON-TRANSFERABLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS. Please
Mark Here
for Address | |
Change or
Comments
SEE REVERSE SIDE
1. ELECTION OF DIRECTORS. To elect the following four (4) 2. OTHER BUSINESS. To transact such other business as may
persons to the Board of Directors of Mid-State to serve for properly come before the Meeting and any adjournment or
a three (3) year term and until their successors are adjournments thereof.
elected and have qualified:
FOR all WITHHOLD The undersigned hereby acknowledges receipt of the Notice of
nominees listed AUTHORITY Meeting, Proxy Statement and Annual Report that accompanies this
(except as marked to to vote for all proxy and ratifies all lawful actions taken by the above named
the contrary) nominees listed proxies.
01 Trudi G. Carey | | | |
02 H. Edward Heron | | | | I (We) will |_| will not |_|
03 James W. Lokey Attend the Annual meeting in person.
04 Stephen P. Maguire
A shareholder may withhold authority to vote for any nominee by
lining through or otherwise striking out the name of such
nominee.
Please sign exactly as your name appears on this Voting
Form. If shares are registered in more than one name, the
signatures of all such persons are required. A corporation
should sign in its full corporate name by a duly authorized
officer, stating such officer's title. Trustees, guardians,
executors and administrators should sign in their official
capacity giving their full title as such. A partnership
should sign in the partnership name by an authorized
person, stating such person's title and relationship to the
partnership.
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.
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^ FOLD AND DETACH HERE ^
REVOCABLE PROXY o MID-STATE BANCSHARES
ANNUAL MEETING OF SHAREHOLDERS - MAY 15, 2003
The designated shareholder(s) of Mid-State Bancshares ("Mid-State") hereby
appoints, constitutes and nominates Carrol R. Pruett 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 Rancho
Santa Barbara Marriott Santa Ynez Valley, 555 McMurray Road, Buellton,
California, on Thursday, May 15, 2003 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 discretionary 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 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.
(Continued and to be marked, dated and signed, on the other side)
- --------------------------------------------------------------------------------
Address Change/Comments (Mark the corresponding box on the reverse side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
^ FOLD AND DETACH HERE ^
BRING THIS ADMISSION TICKET WITH YOU TO THE MEETING ON MAY 15, 2003.
DO NOT MAIL.
This admission ticket admits you to the meeting. You will not be let in to the
meeting without an admission ticket or other proof of stock ownership as of
March 31, 2003, the record date.
ADMISSION TICKET
[MID-STATE BANCSHARE LOGO]
2003 Annual Shareholders Meeting
Thursday, May 15, 2003
7:30 p.m.
Rancho Santa Barbara Marriott-Santa Ynez
555 McMurray Road
Buellton, California 93427
NON-TRANSFERABLE NON-TRANSFERABLE