SCHEDULE 14A INFORMATION
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
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
[x]Definitive Proxy Statement Commission Only (as permitted
[ ]Definitive Additional Materials by Rule 14a-6(e)(2))
[ ]Soliciting Material Under Rule 14a-12
1st STATE BANCORP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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5. Total fee paid:
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[ ] 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:
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4. Date Filed:
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[LOGO]
[1st State Bancorp, Inc. Letterhead]
December 27, 2002
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders (the "Annual
Meeting") of 1st State Bancorp, Inc. (the "Company") to be held at the main
office of 1st State Bank (the "Bank") located at 445 S. Main Street, Burlington,
North Carolina, on Tuesday, January 28, 2003, at 5:30 p.m., eastern time.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting. During the meeting, we will
also report on the operations of 1st State Bank, the Company's wholly owned
subsidiary. Directors and officers of the Company and the Bank will be present
to respond to any questions the stockholders may have.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN, DATE AND RETURN
THE ACCOMPANYING FORM OF PROXY AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO
ATTEND THE ANNUAL MEETING. Your vote is important, regardless of the number of
shares you own. This will not prevent you from voting in person but will assure
that your vote is counted if you are unable to attend the meeting.
On behalf of the Board of Directors and all the employees of the Company
and the Bank, I wish to thank you for your continued support.
Sincerely,
/s/ James C. McGill
James C. McGill
President
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1st STATE BANCORP, INC.
445 S. MAIN STREET
BURLINGTON, NORTH CAROLINA 27215
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 28, 2003
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of 1st State Bancorp, Inc. (the "Company") will be held at the main
office of 1st State Bank (the "Bank"), located at 445 S. Main Street,
Burlington, North Carolina, on Tuesday, January 28, 2003, at 5:30 p.m., eastern
time.
A Proxy Statement and Proxy Card for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon the
following matters:
1. The election of three directors of the Company for three-year terms;
and
2. The transaction of such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The Board of Directors is not aware of any other business to come before
the Annual Meeting.
Any action may be taken on any one of the foregoing proposals at the Annual
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Annual Meeting may be adjourned. Stockholders
of record at the close of business on December 17, 2002, are the stockholders
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof.
You are requested to fill in and sign the enclosed proxy card which is
solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend and vote at the Annual
Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ A. Christine Baker
A. Christine Baker
Secretary
Burlington, North Carolina
December 27, 2002
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
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PROXY STATEMENT
OF
1st STATE BANCORP, INC.
445 S. MAIN STREET
BURLINGTON, NORTH CAROLINA 27215
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ANNUAL MEETING OF STOCKHOLDERS
JANUARY 28, 2003
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GENERAL
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This Proxy Statement is furnished to stockholders of 1st State Bancorp,
Inc. (the "Company") in connection with the solicitation by the Board of
Directors of the Company of proxies to be used at the Annual Meeting of
Stockholders (the "Annual Meeting") which will be held at the main office of 1st
State Bank (the "Bank"), located at 445 S. Main Street, Burlington, North
Carolina, on Tuesday, January 28, 2003, at 5:30 p.m., eastern time, and at any
adjournment thereof. The accompanying Notice of Annual Meeting and proxy card
and this Proxy Statement are being first mailed to stockholders on or about
December 27, 2002.
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VOTING AND REVOCABILITY OF PROXIES
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Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by properly executed proxies
will be voted at the Annual Meeting and all adjournments thereof. Proxies may be
revoked by written notice to A. Christine Baker, Secretary of the Company, at
the address shown above, by filing a later dated proxy prior to a vote being
taken on a particular proposal at the Annual Meeting or by attending the Annual
Meeting and voting in person. The presence of a stockholder at the Annual
Meeting will not in itself revoke such stockholder's proxy.
Proxies solicited by the Board of Directors of the Company will be voted in
accordance with the directions given therein. WHERE NO INSTRUCTIONS ARE
INDICATED, PROXIES WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR SET FORTH BELOW.
The proxy confers discretionary authority on the persons named therein to vote
with respect to the election of any person as a director where the nominee is
unable to serve or for good cause will not serve, and matters incident to the
conduct of the Annual Meeting. If any other business is presented at the Annual
Meeting, proxies will be voted by those named therein in accordance with the
determination of a majority of the Board of Directors. Proxies marked as
abstentions will not be counted as votes cast. Shares held in street name which
have been designated by brokers on proxies as not voted will not be counted as
votes cast. Proxies marked as abstentions or as broker non-votes, however, will
be treated as shares present for purposes of determining whether a quorum is
present.
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VOTING SECURITIES AND SECURITY OWNERSHIP
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The securities entitled to vote at the Annual Meeting consist of the
Company's common stock, par value $.01 per share (the "Common Stock").
Stockholders of record as of the close of business on December 17, 2002 (the
"Record Date") are entitled to one vote for each share of Common Stock then
held. As of the Record Date, there were 2,999,682 shares of Common Stock issued
and outstanding. The presence, in person or by proxy, of at least one-third of
the total number of shares of Common Stock outstanding and entitled to vote will
be necessary to constitute a quorum at the Annual Meeting.
Persons and groups beneficially owning more than 5% of the Common Stock are
required to file certain reports with respect to such ownership pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The following
table sets forth information regarding the shares of Common Stock beneficially
owned as of the Record Date by persons who beneficially own more than 5% of the
Common Stock, each of the Company's directors, the executive officers of the
Company named in the Summary Compensation Table set forth under "Proposal I --
Election of Directors -- Executive Compensation -- Summary Compensation Table,"
and all of the Company's directors and executive officers as a group.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED PERCENT OF
AS OF THE RECORD DATE (1) CLASS (2)
------------------------- ----------
5% Stockholder:
--------------
1st State Bancorp, Inc. 316,915 (3) 10.56%
Employee Stock Ownership Plan ("ESOP")
445 S. Main Street
Burlington, North Carolina 27215
1st State Bank Foundation, Inc. 117,585 3.92
445 S. Main Street
Burlington, North Carolina 27215
1st State Bank Deferred Compensation Plan ("DCP") 304,066 (4) 10.14
445 S. Main Street
Burlington, North Carolina 27215
Maurice J. Koury 290,005 (5) 9.67
P.O. Drawer 850
Burlington, North Carolina 27216
Directors
---------
Bernie C. Bean 31,675 1.05
James C. McGill 165,134 (6) 5.36
Virgil L. Stadler 72,440 (7) 2.40
James A. Barnwell, Jr. 61,675 (6) 2.05
James G. McClure 58,288 (7) 1.93
T. Scott Quakenbush 72,986 2.42
Richard C. Keziah 65,766 (6) 2.18
Richard H. Shirley 47,219 (7) 1.57
Ernest A. Koury, Jr. 1,000 0.03
Executive Officers
------------------
A. Christine Baker 95,240 3.13
Fairfax C. Reynolds 82,282 2.70
Frank Gavigan 32,244 1.07
John D. Hansell 12,970 0.43
All directors and executive 798,919 24.22
officers of the Company
as a group (13 persons)
(footnotes on following page)
2
(footnotes for table on previous page)
________________
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), a person is deemed to be the beneficial
owner, for purposes of this table, of any shares of Common Stock if he or
she has or shares voting or investment power with respect to such Common
Stock or has a right to acquire beneficial ownership at any time within 60
days from the Record Date. As used herein, "voting power" is the power to
vote or direct the voting of shares and "investment power" is the power to
dispose or direct the disposition of shares. The listed amounts include
15,816, 79,078, 15,816, 15,816, 15,816, 15,816, 15,816, 15,816, 0, 45,000,
45,000, 11,250, 7,500 and 298,540 shares that Directors Bean, McGill,
Stadler, Barnwell, McClure, Quakenbush, Keziah, Shirley and Koury,
Executive Officers Baker, Reynolds, Gavigan and Hansell, and all directors
and executive officers of the Company as a group, respectively, have the
right to acquire upon the exercise of options exercisable within 60 days of
the Record Date.
(2) Based on a total of 2,999,682 shares of Common Stock outstanding as of the
Record Date.
(3) These shares are currently held in a suspense account for future allocation
and distribution among participants as the loan used to purchase the shares
is repaid. At the Record Date, 93,945 shares had been allocated or
committed to be allocated. See footnote 7 below for information on how
these shares are voted.
(4) The shares held by the DCP trust are held for the benefit of directors and
executive officers of the Company in the following amounts: Mr. Bean
12,437; Mr. McGill 97,030; Mr. Stadler 17,325; Mr. Barnwell 13,348; Mr.
McClure 13,007; Mr. Quakenbush 17,465; Mr. Keziah 18,449; Mr. Shirley
13,348; Ms. Baker 45,349; Mr. Reynolds 51,580; Mr. Gavigan 3,446; and Mr.
Hansell 1,282. Such individuals do not have voting or investment power over
such shares.
(5) Based on a Schedule 13G filed by Mr. Koury on February 11, 2002. Includes
17,500 shares held by the Maurice J. Koury Foundation, Inc. (the "Koury
Foundation"), 53,500 shares held by Carolina Hosiery Mills, Inc. ("Carolina
Hosiery"); and 19,000 shares held by the Carolina Hosiery Mills, Inc.
Employee Profit Sharing Trust ("Trust"). Mr. Koury is (a) one of four
directors and president of the Koury Foundation; (b) a director, president
and 23.6% shareholder of Carolina Hosiery; and (c) a trustee of the Trust.
In all such cases, Mr. Koury may have input into decisions concerning the
voting power over the shares held by the Koury Foundation, Carolina Hosiery
and the Trust in certain limited circumstances.
(6) The listed amounts do not include shares with respect to which Directors
Barnwell, Keziah and McGill share voting power by virtue of their positions
as directors of 1st State Bank Foundation, Inc. (the "Foundation"), which
holds 117,585 shares of Common Stock. The shares held by the Foundation are
voted in the same ratio as all other shares of Common Stock are voted on
any given proposal submitted to stockholders.
(7) The listed amounts do not include shares with respect to which Directors
Shirley, McClure and Stadler have voting power by virtue of their positions
as trustees of the trusts holding 316,915 shares under the ESOP and 304,066
shares under the DCP. Shares held by the ESOP trust and allocated to the
accounts of participants are voted in accordance with the participants'
instructions, and unallocated shares are voted in the same ratio as ESOP
participants direct the voting of allocated shares or, in the absence of
such direction, in the ESOP trustees' best judgment. The shares held by the
DCP trust are voted in the same proportion as the ESOP trustees vote the
shares held in the ESOP trust.
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PROPOSAL I -- ELECTION OF DIRECTORS
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GENERAL
The Company's Board of Directors consists of nine members. The Company's
Articles of Incorporation require that directors be divided into three classes,
as nearly equal in number as possible, with approximately one-third of the
directors elected each year. At the Annual Meeting, three directors will be
elected for a term expiring at the 2006 annual meeting of stockholders. The
Board of Directors has nominated Bernie C. Bean, James C. McGill and Virgil L.
Stadler to serve as directors for a three-year period. All nominees are
currently members of the Board. Under Virginia law and the Company's Bylaws,
directors are elected by a plurality of the votes present in person or by proxy
at a meeting at which a quorum is present.
It is intended that the persons named in the proxies solicited by the Board
of Directors will vote for the election of the named nominees. If either nominee
is unable to serve, the shares represented by all valid proxies will be voted
for the election of such substitute as the Board of Directors may recommend or
the size of the Board may be reduced to eliminate the vacancy. At this time, the
Board knows of no reason why any nominee might be unavailable to serve.
3
The following table sets forth, for each nominee for director and
continuing director of the Company, his age, the year he first became a director
of the Bank, which is the Company's principal operating subsidiary, and the
expiration of his term as a director. All such persons except Mr. Koury were
appointed as directors of the Company in 1998 in connection with the
incorporation and organization of the Company. Each director of the Company also
is a member of the Board of Directors of the Bank.
YEAR FIRST
AGE AT ELECTED AS CURRENT
SEPTEMBER 30, DIRECTOR OF TERM
NAME 2002 THE BANK TO EXPIRE
---- -------- ---------- ---------
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2006
Bernie C. Bean 72 1978 2003
James C. McGill 61 1988 2003
Virgil L. Stadler 66 1982 2003
DIRECTORS CONTINUING IN OFFICE
James A. Barnwell, Jr. 62 1988 2004
James G. McClure 57 1989 2004
T. Scott Quakenbush 71 1978 2004
Richard C. Keziah 70 1983 2005
Ernest A. Koury, Jr. 48 2000 2005
Richard H. Shirley 55 1987 2005
Set forth below is information concerning the Company's directors. Unless
otherwise stated, all directors have held the positions indicated for at least
the past five years.
BERNIE C. BEAN is retired. From 1988 to 1995 he was the President and
General Manager of Craftique, Inc., a furniture manufacturer located in Mebane,
North Carolina.
JAMES C. MCGILL is the President and Chief Executive Officer of the Company
and has been the President and Chief Executive Officer of the Bank since
December 1988. He has served on the Boards of Hospice of Alamance and Alamance
Community College and in 1997 served as the chairman of the North Carolina
Bankers Association. He also serves as a director of 1st State Bank Foundation,
Inc. (the "Foundation"), a charitable foundation dedicated to charitable and
community service causes within the Bank's community.
VIRGIL L. STADLER retired in October 2001 from his position as Chief
Executive Officer of Stadler's Country Hams, Inc. in Elon College, North
Carolina. He is active with the Front Street United Methodist Church and Elon
Homes for Children.
JAMES A. BARNWELL, JR. is President of Huffman Oil Co., Inc., a petroleum
marketer in Burlington, North Carolina. He has served on the advisory board of
the Salvation Army Boys & Girls Club and the Alamance County YMCA board. He
serves as a director of the Foundation. He also serves on the Board of Directors
of the Alamance Regional Medical Center.
JAMES G. MCCLURE is President of Green & McClure, a retail furniture store
in Graham, North Carolina. He currently serves as President of the Graham Area
Business Association and has served on the zoning board for the city of Graham.
He is active in the Graham Presbyterian Church.
4
T. SCOTT QUAKENBUSH retired in April 1997 from his position as Vice
President and sales manager with Carolina Paper Box Company in Burlington, North
Carolina.
RICHARD C. KEZIAH, the Chairman of the Board of Directors of the Company,
is President of Monarch Hosiery Mills, Inc. in Burlington, North Carolina. He
also serves on the Board of Directors of Elon Homes for Children. He also serves
as a director of the Foundation.
ERNEST A. KOURY, JR. is Vice President of Carolina Hosiery Mills, Inc., a
hosiery mill in Burlington, North Carolina. He serves as Vice Chairman of the
Alamance County Planning and Zoning Board and Chairman of the Elon University
Board of Visitors.
RICHARD H. SHIRLEY is President of Dick Shirley Chevrolet, Inc., an
automobile dealership located in Burlington, North Carolina. He has served as
the President of the Alamance County YMCA and as a member and chairman of the
Economic Development Committee of the Burlington area Chamber of Commerce.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following sets forth information with respect to executive officers who
do not serve on the Board of Directors.
AGE AT
SEPTEMBER 30,
NAME 2002 TITLE
---- ------------- -----
A. Christine Baker 49 Treasurer and Secretary of the Company and the Bank
and Executive Vice President - Chief Financial
Officer of the Bank
Fairfax C. Reynolds 49 Vice President and Assistant Secretary of the
Company and Executive Vice President -Commercial
and Retail Banking of the Bank
Frank Gavigan 44 Senior Vice President - Senior Credit Officer of the
Bank
John D. Hansell 65 Manager - First Capital Services, LLC
A. CHRISTINE BAKER is the Treasurer and Secretary of the Company and served
as the Executive Vice President, Secretary and Treasurer of the Bank since April
1985. She currently serves as Treasurer and director of the Women's Resource
Center of Alamance County and is active in the First Presbyterian Church of
Burlington.
FAIRFAX C. REYNOLDS is the Vice President and Assistant Secretary of the
Company and has served as the Bank's Executive Vice President in charge of
Commercial and Retail Banking since 1989. He serves on the Boards of Directors
of Alamance County YMCA, the Alamance County Arts Council and the United Way of
Alamance County.
FRANK GAVIGAN has served as the Bank's Senior Vice President - Senior
Credit Officer since 1990. He serves on the Boards of Directors of Hospice of
Alamance County and Alamance Eldercare.
JOHN D. HANSELL has served since May 1987 as Manager of First Capital
Services Company, LLC and its predecessor, First Capital Services, Inc.,
entities the Company owns that sell annuities, mutual funds and insurance
products on an agency basis. He has served on the small business council of the
Alamance Chamber of Commerce and on the Board of Directors of the Financial
Planning Association.
5
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company meets monthly and may have additional
special meetings. During the year ended September 30, 2002, the Board of
Directors of the Company met 12 times and the Board of Directors of the Bank met
12 times. No director attended fewer than 75% in the aggregate of the total
number of Company Board of Directors meetings held during the year ended
September 30, 2002 and the total number of meetings held by committees on which
he served during such fiscal year. The Company's Board of Directors has standing
Audit and Executive Committees.
The Board of Directors' Audit Committee consists of Directors Keziah,
McClure and Stadler, who serves as Chairperson. The members of the Audit
Committee are "independent," as "independent" is defined in Rule 4200(a)(15) of
the National Association of Securities Dealers listing standards. The function
of the Audit Committee is: to review and discuss the audited financial
statements with management, internal audit and the independent auditors; to
receive disclosures required by SAS No. 61 and the independence letter from the
independent auditors; to review and recommend the independent auditors to be
engaged by the Company; to review the internal audit function and internal
accounting controls; and to review and approve the internal audit plan. The
Company's Board of Directors has adopted a written charter for the Audit
Committee. The Audit Committee met two times during the year ended September 30,
2002.
The Board of Directors' Executive Committee consists of Directors McGill,
Barnwell, Shirley and Keziah and one additional director who serves on a
rotating basis for a three-month period. The Executive Committee, among other
things, evaluates the compensation and benefits of the directors, officers and
employees, recommends changes, and monitors and evaluates employee performance.
The Executive Committee reports its evaluations and findings to the full Board
of Directors and all compensation decisions are ratified by the full Board of
Directors. Directors of the Company who also are officers of the Company abstain
from discussion and voting on matters affecting their compensation. The
Executive Committee also monitors the performance of the Company's investment
portfolio and reviews loans. The Executive Committee is empowered to exercise
all of the authority of the Board when the Board is not in session. The
Executive Committee met 12 times during the fiscal year ended September 30,
2002.
The Company's full Board of Directors acts as a nominating committee. The
Board of Directors met once during the year ended September 30, 2002 for the
purpose of considering potential nominees to the Board of Directors. In its
deliberations, the Board, functioning as a nominating committee, considers the
candidate's knowledge of the banking business and involvement in community,
business and civic affairs, and also considers whether the candidate would
provide for adequate representation of its market area. The Company's Articles
of Incorporation set forth procedures that must be followed by stockholders
seeking to make nominations for director. In order for a stockholder of the
Company to make any nominations, he or she must give written notice thereof to
the Secretary of the Company not less than thirty days nor more than sixty days
prior to the date of any such meeting; provided, however, that if less than
forty days' notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the Secretary of the Company not
later than the close of business on the tenth day following the day on which
notice of the meeting was mailed to stockholders. Each such notice given by a
stockholder with respect to nominations for the election of directors must set
forth (i) the name, age, business address and, if known, residence address of
each nominee proposed in such notice; (ii) the principal occupation or
employment of each such nominee; and (iii) the number of shares of stock of the
Company which are beneficially owned by each such nominee. In addition, the
stockholder making such nomination must promptly provide any other information
reasonably requested by the Company.
6
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview and Philosophy
The Company's executive compensation policies are established by the
Executive Committee of the Board of Directors (the "Committee"). The Committee
is responsible for developing the Company's executive compensation policies. The
Company's President, James C. McGill, under the direction of the Committee,
implements the Company's executive compensation policies. Mr. McGill abstains
from voting on and discussions of matters affecting his compensation. The
Committee's objectives in designing and administering the specific elements of
the Company's executive compensation program are as follows:
o To link executive compensation rewards to increases in shareholder
value, as measured by favorable long-term operating results and
continued strengthening of the Company's financial condition.
o To provide incentives for executive officers to work towards achieving
successful annual results as a step in achieving the Company's
long-term operating results and strategic objectives.
o To correlate, as closely as possible, executive officers' receipt of
compensation with the attainment of specified performance objectives.
o To maintain a competitive mix of total executive compensation, with
particular emphasis on awards related to increases in long-term
shareholder value.
o To attract and retain top performing executive officers for the
long-term success of the Company.
In furtherance of these objectives, the Committee has determined that there
should be three specific components of executive compensation: base salary, a
cash bonus and stock benefit plans.
Base Salary. The Committee makes recommendations to the Board concerning
executive compensation on the basis of surveys of salaries paid to executive
officers of other bank holding companies, non-diversified banks and other
financial institutions similar in size, market capitalization and other
characteristics. The Committee's objective is to provide for base salaries that
are competitive with the average salary paid by the Company's peers.
Bonus. The Company pays a discretionary bonus on an annual basis based on
satisfaction of a combination of individual and Company performance objectives.
Whether bonuses are paid each year and the amount of such bonuses are determined
by the Committee, subject to ratification by the Board of Directors, at year end
based on the Company's ability to achieve performance goals established by the
Board in each year's Business Plan. Discretionary bonuses for achieving specific
performance goals during the year are paid during the next fiscal year.
Stock Benefit Plans. In addition, the Committee believes that stock related
award plans are an important element of compensation since they provide
executives with incentives linked to the performance of the Common Stock.
Accordingly, the Board of Directors adopted a stock option plan and a management
recognition plan. Stockholders approved these plans at a special meeting held on
June 6, 2000.
Under the stock option plan, the Company reserved for issuance a number of
shares equal to 10% of the originally issued Common Stock. The Committee
believes that stock options are an important element of compensation because
they provide executives with incentives linked to the performance of the Common
Stock. The Company awards stock options as a means of providing employees the
opportunity to acquire a proprietary interest in the Company and to link their
interests with those of the Company's stockholders. Options are granted
7
with an exercise price equal to the market value of the Common Stock on the date
of grant, and thus acquire value only if the Company's stock price increases.
There are currently no options available for grant under the option plan.
Under the management recognition plan, officers and directors were granted
awards of restricted Common Stock, subject to vesting and forfeiture as
determined by the Committee. Under this plan, the Company reserved for issuance
a number of shares equal to 4% of the originally issued Common Stock. The
purpose of a management recognition plan is to reward and retain personnel of
experience and ability in key positions of responsibility by providing such
employees with a proprietary interest in the Company as compensation for their
past contributions to the Company and the Bank and as an incentive to make
further contributions in the future. There currently are no shares available for
award under this plan.
Compensation of the President
Mr. McGill's base salary is established in accordance with the terms of the
employment agreement entered into between the Bank and Mr. McGill. See " --
Executive Compensation -- Employment Agreements." The Committee determines the
President's compensation on the basis of several factors. In determining Mr.
McGill's base salary, the Committee reviewed compensation paid to chief
executive officers of similarly situated banks and non-diversified banks and
other financial institutions of similar asset size. The Committee believes that
Mr. McGill's base salary is generally competitive with the average salary paid
to executives of similar rank and expertise at banking institutions which the
Committee considered to be comparable and taking into account the Bank's
superior performance and complex operations relative to comparable institutions.
Mr. McGill received bonus compensation for fiscal year 2002 pursuant to the
same basic factors as described above under " -- Bonus." In establishing Mr.
McGill's bonus, the Committee considered the Company's overall performance,
record of increase in shareholder value and success in meeting strategic
objectives and his personal leadership and accomplishments. These factors were
considered in conjunction with the Company's financial results for fiscal 2002
in relation to the established Business Plan and achieving certain annual
performance goals, including but not limited to return on assets and return on
equity and satisfactory results of regulatory examinations and independent
audits.
The Committee believes that the Company's executive compensation program
serves the Company and its shareholders by providing a direct link between the
interests of executive officers and those of shareholders generally and by
helping to attract and retain qualified executive officers who are dedicated to
the long-term success of the Company.
Members of the Executive Committee
James A. Barnwell
Richard C. Keziah
James C. McGill
Richard H. Shirley
8
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph and table which follow show the cumulative total return on the
Common Stock for the period from April 26, 1999 (the day trading began in the
Common Stock following completion of the Company's initial public offering)
through the fiscal year ended September 30, 2002 with (1) the total cumulative
return of all companies whose equity securities are traded on the Nasdaq Stock
Market and (2) the total cumulative return of banks and bank holding companies
traded on the Nasdaq Stock market. The comparison assumes $100 was invested on
April 26, 1999 in the Company's Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends. The stockholder returns shown on
the performance graph are not necessarily indicative of the future performance
of the Common Stock or of any particular index.
CUMULATIVE TOTAL STOCKHOLDER RETURN
COMPARED WITH PERFORMANCE OF SELECTED INDEXES
APRIL 26, 1999 THROUGH SEPTEMBER 30, 2002
[Line graph appears here depicting the cumulative total shareholder return
of $100 invested in the Common Stock as compared to $100 invested in all
companies whose equity securities are traded on the Nasdaq Stock Market and $100
invested in banks and bank holding companies traded on the Nasdaq Stock Market.
Line graph plots the cumulative total return from April 26, 1999 to September
30, 2002. Plot points are provided below.]
04/26/99 09/30/99 09/30/00 9/30/01 9/30/02
-------- -------- -------- ------- -------
COMPANY $100.0 $103.1 $119.4 $142.2 $164.8
----------------------------------------------------------------------------------------
NASDAQ 100.0 104.0 138.1 56.4 44.5
----------------------------------------------------------------------------------------
NASDAQ BANKS 100.0 92.3 98.9 112.2 118.5
AND BANK HOLDING
COMPANIES
9
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the cash and
noncash compensation for the fiscal years ended September 30, 2002, 2001 and
2000 awarded to or earned by the President and the four other executive officers
who earned salary and bonus in fiscal 2002, 2001 and 2000 exceeding $100,000 for
services rendered in all capacities to the Company and the Bank .
LONG-TERM COMPENSATION
-----------------------------
AWARDS
ANNUAL COMPENSATION -----------------------------
-------------------------------------- RESTRICTED SECURITIES
FISCAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME YEAR SALARY BONUS COMPENSATION(1) AWARD(S) (2) OPTIONS COMPENSATION
---- ---- ------ ----- --------------- ------------ ------- ------------
James C. McGill 2002 $175,000 $404,500 $ -- -- -- $208,332 (3)
President and Chief 2001 175,000 342,000 -- -- -- 203,021
Executive Officer of 2000 175,000 433,000 -- 582,750 79,078 202,710
the Company and the
Bank
A. Christine Baker 2002 100,000 202,250 -- -- -- 99,224 (3)
Treasurer and 2001 100,000 171,000 -- -- -- 92,244
Secretary of the 2000 100,000 216,500 -- 333,000 45,000 97,693
Company and the
Bank and Executive
Vice President-
Chief Financial Officer
of the Bank
Fairfax C. Reynolds 2002 100,000 202,250 -- -- -- 102,201 (3)
Vice President and 2001 100,000 171,000 -- -- -- 95,221
Assistant Secretary of 2000 100,000 216,500 -- 333,000 45,000 100,670
the Company and
Executive Vice
President of the
Bank
Frank Gavigan 2002 80,000 35,000 -- -- -- 33,209 (3)
Senior Vice 2001 80,000 30,000 -- -- -- 30,000
President-Senior 2000 80,000 35,000 -- 83,250 11,250 30,000
Credit Officer of
the Bank
John D. Hansell 2002 50,000 70,640 (4) -- -- -- 37,135 (3)
Manager-First 2001 50,000 111,803 (4) -- -- -- 30,000
Capital Services 2000 50,000 100,503 (4) -- 55,500 7,500 30,000
Company, LLC
___________
(1) Executive officers receive indirect compensation in the form of certain
perquisites and other personal benefits. The amount of such benefits
received by the named executive officer in fiscal 2002 did not exceed 10%
of the executive officer's salary and bonus.
(2) Amount shown in the table is based on the closing price of the Common Stock
of $18.50 as quoted on the Nasdaq National Market on the date of grant,
June 6, 2000. The restricted Common Stock awarded vested at the rate of 33
1/3% per year beginning with the date of grant, with the second 33 1/3%
having vested on June 6, 2001 and the final 33 1/3% having vested on June
6, 2002.
(3) Includes $168,332, $59,224 and $62,201 accrued under the Company's Deferred
Compensation Plan for the benefit of executive officers McGill, Baker and
Reynolds, respectively, for service as an employee during the year ended
September 30, 2002. Also includes $40,000, $40,000, $40,000, $30,809 and
$35,635 in shares of Common Stock committed to be allocated during the year
ended September 30, 2002 under the ESOP to the accounts of executive
officers McGill, Baker, Reynolds, Gavigan and Hansell, respectively, and
$2,400 and $1,500 in matching contributions under the Bank's 401(k) Plan
for executive officers Gavigan and Hansell, respectively.
(4) Consists of commissions.
10
Fiscal Year-End Option Values. The following table sets forth information
concerning the value as of September 30, 2002 of options held by the executive
officers named in the Summary Compensation Table set forth above.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
---------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
James C. McGill 79,078 -- $638,159 --
A. Christine Baker 45,000 -- 363,150 --
Fairfax C. Reynolds 45,000 -- 363,150 --
Frank Gavigan 11,250 -- 90,788 --
John D. Hansell 7,500 -- 60,525 --
-----------
(1) Based on the difference between the fair market value of the underlying
Common Stock as quoted on the Nasdaq National Market System on September
30, 2002 of $22.78 per share, and the exercise price of $14.71 per share,
which was adjusted to reflect the effect of the return of capital of $5.17
per share paid on October 2, 2000.
No options were exercised during fiscal year 2002, and no options held by
any executive officer of the Company repriced during the past ten full fiscal
years.
Employment Agreements and Guaranty Agreements. The Bank has entered into
employment agreements with James C. McGill, A. Christine Baker and Fairfax C.
Reynolds (each individual is referred to herein as an "Employee" and the three
individuals are referred to collectively as the "Employees"). The Board believes
that the employment agreements assure fair treatment of the Employees in their
careers with the Company by assuring them of some financial security.
The employment agreements became effective on April 23, 1999 and provide
for a term of three years, with an annual base salary equal to the Employee's
existing base salary rate in effect on the date of conversion. On each
anniversary date of the commencement of the employment agreements, the term of
the Employee's employment will be extended for an additional one-year period
beyond the then effective expiration date upon a determination by the Bank's
Board of Directors that the performance of the Employee has met the required
performance standards and that such employment agreements should be extended.
The employment agreements provide the Employee with a salary review by the Board
of Directors not less often than annually, as well as with inclusion in any
discretionary bonus plans, retirement and medical plans, vacation and sick leave
and any fringe benefits that become available to senior management, including
for example, any stock option or incentive compensation plans and any other
benefits commensurate with their responsibilities. If the Board decides not to
renew an employment agreement for any reason, and if the Employee remains an
employee of the Bank until the Agreement expires, the Bank must pay the Employee
an amount equal to two times total compensation if the Employee is later
terminated.
The employment agreements terminate upon the Employee's death, may
terminate upon the Employee's disability, are terminable for just cause, and no
severance benefits are available. If the Bank terminates the Employee without
just cause, the Employee is entitled to receive three times total compensation
as well as continued medical and dental insurance under any group plan chosen by
the Employee from the plans the Bank maintains, unless that coverage is not
permitted by the terms of such plan, in which case the Bank will remit to the
Employee, not less frequently than monthly, the actual cost to the Employee of
equivalent insurance. These provisions are in addition to, and not in lieu of,
any other rights that the Employee has under the employment agreement and will
continue until the Employee first becomes eligible for participation in
Medicare. If the employment agreements are terminated due to the Employee's
"disability" as defined in the employment agreements, the Employee will be
entitled to a continuation of his or her salary and benefits through the date of
termination, including any period prior to the establishment of the Employee's
disability. In the event of the Employee's death during the term of the
employment agreements, his or her estate will be entitled to receive three times
total compensation determined as of the date of death. Each Employee is able to
voluntarily terminate his or her employment agreement by providing 90 days'
written notice to the Board of Directors, in which case the Employee is entitled
to receive only his or her compensation, vested rights, and benefits up to the
date of termination.
11
The Bank will pay a severance benefit equal to the difference between the
product of 2.99 and the Employee's "base amount" as defined in the Internal
Revenue Code Section 280G(b)(3) and the sum of any other "parachute payments" as
defined under Code Section 280G(b)(2) that the Employee receives on account of
the change in control, and (ii) provide long-term disability and medical
insurance for 18 months if any of the following occur:
o the Employee's involuntary termination of employment other than for
"just cause" during the period beginning six months before a change in
control and ending on the later of the first anniversary of the change
in control or the expiration date of the employment agreements (the
"Protected Period");
o the Employee's voluntary termination within 90 days of the occurrence
of certain specified events occurring during the Protected Period
which have not been consented to by the Employee; or
o the Employee's voluntary termination of employment for any reason
within the 30-day period beginning on the date of the change in
control.
The Employee will be paid either in one lump sum within ten days of the
later of the date of the change in control and the Employee's last day of
employment or if prior to the date which is 90 days before the date on which a
change in control occurs, the Employee filed a duly executed irrevocable written
election, payment of such amount shall be made according to the elected
schedule. "Change in control" generally refers to the acquisition, by any person
or entity, of the ownership or power to vote more than 25% of the Company's or
the Bank's voting stock, the control of the election of a majority of the
Company's or the Bank's directors, or the exercise of a controlling influence
over the Company's or the Bank's management or policies. In addition, under the
employment agreements, a change in control occurs when, during any consecutive
two-year period, directors of the Company or the Bank at the beginning of such
period cease to constitute two-thirds of the Board of Directors of the Company
or the Bank, unless the election of replacement directors was approved by a
two-thirds vote of the initial directors then in office. The employment
agreements provide that within 10 business days of a change in control, the
Company must deposit in a trust an amount equal to the Internal Revenue Code
Section 280G maximum. The payments that would be made to Mr. McGill, Ms. Baker
and Mr. Reynolds assuming termination of employment under the foregoing
circumstances at September 30, 2002 would have been approximately $1.5 million,
$769,000 and $769,000, respectively. These provisions may have an anti-takeover
effect by making it more expensive for a potential acquiror to obtain control of
the Company. In the event that the Employee prevails over the Bank, or obtains a
written settlement, in a legal dispute as to the employment agreement, he or she
will be reimbursed for legal and other expenses.
In addition to the employment agreements, the Company has entered into
guaranty agreements with each of the Employees. The guaranty agreements provide
that the Company will perform all covenants and honor all obligations required
to be performed or to which the Bank is subject pursuant to the employment
agreements in the event that such covenants are not performed or obligations are
not honored by the Bank, and that to the extent permitted by law, the Company
will be jointly and severally liable with the Bank for the payment of all
amounts due under the employment agreements. The guarantee agreements provide
the Employee with a salary review by the Board of Directors not less often than
annually, as well as with inclusion in any discretionary bonus plans, retirement
and medical plans, customary fringe benefits, vacation and sick leave.
DIRECTOR COMPENSATION
Fees. Each non-employee member of the Bank's Board of Directors receives a
monthly retainer fee based on the following schedule:
o the Chairman of the Board - $2,000;
o members of the Executive Committee - $1,750; and
o other directors - $1,500.
12
In addition, non-employee members of the Company's Board of Directors receive a
monthly retainer fee of $250. This amount will be increased to $500 effective
January 1, 2003. Officers who are directors are not compensated for their
service as directors.
Deferred Compensation Plan. The Bank adopted the DCP for the Bank's
directors and select executive officers. Under the DCP, before each fiscal year
begins, each non-employee director may elect to defer receipt of all or part of
his future fees and any other participant may elect to defer receipt of up to
25% of his or her salary or 100% of his or her bonus compensation for the year.
Deferred amounts are credited at the end of the calendar year to bookkeeping
accounts in the name of each participant. No amounts were credited to the
accounts of nonemployee directors during the year ended September 30, 2002. Each
participant is fully vested in his or her account balance under the DCP.
Until distributed in accordance with the terms of the DCP, each
participant's account will be credited with a rate of return equal to the Bank's
highest rate of interest paid on the Bank's one-year certificates of deposit or
the total return on the Company's Common Stock, as elected by each participant.
Account balances will normally be distributed in five substantially equal annual
installments beginning during the first quarter of the calendar year following
the calendar year in which the participant ceases to be a director or employee,
with any subsequent distributions being made by the last day of the first
quarter of each subsequent calendar year until the participant has received the
entire amount of his or her account. Participants may, however, elect to receive
their distributions in a lump sum or in installments paid over a period of up to
10 years. In the event of a participant's death, the balance of his plan account
will be paid in a lump sum (unless the participant elects to continue the
previously designated distribution method) to his designated beneficiary, or if
none, his estate.
The Bank has established a trust in order to hold assets with which to pay
plan benefits to participants. Trust assets are subject to claims of general
creditors. In the event a participant prevails over the Bank in a legal dispute
as to the terms or interpretation of the DCP, he or she would be reimbursed for
his legal and other expenses.
TRANSACTIONS WITH MANAGEMENT
The Bank offers loans to its directors and executive officers. These loans
were made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than the
normal risk of collectibility or present other unfavorable features. Under
current law, the Bank's loans to directors and executive officers are required
to be made on substantially the same terms, including interest rates, as those
prevailing for comparable transactions with other persons and must not involve
more than the normal risk of repayment or present other unfavorable features.
Furthermore, all loans to such persons must be approved in advance by a
disinterested majority of the Company's Board of Directors. At September 30,
2002, loans to directors and executive officers and their affiliates totaled
$16.0 million, or 26.0% of the Company's stockholders' equity, at that date.
--------------------------------------------------------------------------------
RELATIONSHIP WITH INDEPENDENT AUDITOR
--------------------------------------------------------------------------------
KPMG LLP was the Company's independent auditor for the 2002 fiscal year.
KPMG LLP has been retained by the Board of Directors to be the Company's auditor
for the 2003 fiscal year. A representative of KPMG LLP is expected to be present
at the Annual Meeting and will have the opportunity to make a statement if he or
she so desires. The representative will also be available to answer appropriate
questions.
13
--------------------------------------------------------------------------------
REPORT OF THE AUDIT COMMITTEE
--------------------------------------------------------------------------------
The Audit Committee of the Board of Directors (the "Audit Committee") has:
1. Reviewed and discussed the audited financial statements for the fiscal
year ended September 30, 2002 with the management of the Company.
2. Discussed with the Company's independent auditors the matters required
to be discussed by Statement of Accounting Standards No. 61, as the
same was in effect on the date of the Company's financial statements;
and
3. Received the written disclosures and the letter from the Company's
independent auditors required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), as the same
was in effect on the date of the Company's financial statements.
Based on the foregoing materials and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements for
the fiscal year ended September 30, 2002 be included in the Company's Annual
Report on Form 10-K for the year ended September 30, 2002.
The Audit Committee has reviewed the non-audit services currently provided
by the Company's independent auditor and has considered whether the provision of
such services is compatible with maintaining the independence of the Company's
independent auditors.
Members of the Audit Committee
Virgil L. Stadler, Chairman
Richard C. Keziah
James G. McClure
--------------------------------------------------------------------------------
AUDIT AND OTHER FEES PAID TO INDEPENDENT AUDITOR
--------------------------------------------------------------------------------
AUDIT FEES
During the fiscal year ended September 30, 2002, the aggregate fees for
professional services rendered for the audit of the Company's annual financial
statements and the reviews of the financial statements included in the Company's
Quarterly Reports on Form 10-Q filed for the fiscal year ended September 30,
2002 were $86,300.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not engage KPMG LLP to provide advice to the Company
regarding financial information systems design and implementation during the
fiscal year ended September 30, 2002.
ALL OTHER FEES
For the fiscal year ended September 30, 2002, the aggregate fees for
professional services rendered by KPMG LLP for all other services (other than
audit services and financial information systems design and implementation
services) were $21,550, consisting of nonaudit tax compliance services ($19,350)
and audit related agreed upon procedures services ($2,200).
14
--------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------
Pursuant to regulations promulgated under the Exchange Act, the Company's
officers and directors and all persons who own more than ten percent of the
Common Stock ("Reporting Persons") are required to file reports detailing their
ownership and changes of ownership in the Common Stock and to furnish the
Company with copies of all such ownership reports that are filed. Based solely
on the Company's review of the copies of such ownership reports which it has
received in the past fiscal year or with respect to the past fiscal year, or
written representations that no annual report of changes in beneficial ownership
were required, the Company believes that during fiscal year 2002 all Reporting
Persons have complied with these reporting requirements, except that Director
Keziah failed to file timely one Form 4 reporting a single transaction. The
transaction was reported on a Form 4 filed on September 10, 2002.
--------------------------------------------------------------------------------
OTHER MATTERS
--------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this proxy statement
and matters incident to the conduct of the Annual Meeting. However, if any other
matters should properly come before the Annual Meeting, it is intended that
proxies in the accompanying form will be voted in respect thereof in accordance
with the determination of a majority of the Board of Directors.
--------------------------------------------------------------------------------
MISCELLANEOUS
--------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The Company
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
The Company's 2002 Annual Report to Stockholders, including financial
statements, is being mailed to all stockholders of record as of the close of
business on the Record Date. Any stockholder who has not received a copy of such
Annual Report may obtain a copy by writing to the Secretary of the Company. The
Annual Report is not to be treated as a part of the proxy solicitation material
or as having been incorporated herein by reference.
15
--------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
For consideration at the Annual Meeting, a stockholder proposal must be
delivered or mailed to the Company's Secretary no later than January 6, 2003. In
order to be eligible for inclusion in the proxy materials of the Company for the
Annual Meeting of Stockholders for the year ending September 30, 2003, any
stockholder proposal to take action at such meeting must be received at the
Company's executive offices at 445 S. Main Street, Burlington, North Carolina
27215 by no later than August 29, 2003. Any such proposals shall be subject to
the requirements of the proxy rules adopted under the Securities Exchange Act of
1934, as amended.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ A. Christine Baker
A. Christine Baker
Secretary
December 27, 2002
Burlington, North Carolina
--------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 2002 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WILL BE FURNISHED WITHOUT CHARGE TO EACH STOCKHOLDER AS OF THE RECORD DATE UPON
WRITTEN REQUEST TO THE CORPORATE SECRETARY, 1st STATE BANCORP, INC., 445 S. MAIN
STREET, BURLINGTON, NORTH CAROLINA 27215.
16
REVOCABLE PROXY
--------------------------------------------------------------------------------
1st STATE BANCORP, INC.
BURLINGTON, NORTH CAROLINA
--------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 28, 2003
The undersigned hereby appoints Richard C. Keziah, Ernest A. Koury, Jr. and
Richard H. Shirley with full powers of substitution, to act as attorneys and
proxies for the undersigned, to vote all shares of the common stock of 1st State
Bancorp, Inc. which the undersigned is entitled to vote at the Annual Meeting of
Stockholders, to be held at the main office of 1st State Bank (the "Bank")
located at 445 S. Main Street, Burlington, North Carolina, on Tuesday, January
28, 2003, at 5:30 p.m. (the "Annual Meeting"), and at any and all adjournments
thereof, as follows:
VOTE
FOR WITHHELD
--- --------
1. The election as directors of all
nominees listed below (except as [ ] [ ]
marked to the contrary below).
For a term expiring at the 2006 Annual Meeting:
----------------------------------------------
Bernie C. Bean
James C. McGill
Virgil L. Stadler
INSTRUCTION: TO WITHHOLD YOUR VOTE
FOR ANY OF THE INDIVIDUALS NOMINATED, INSERT
THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.
__________________________
2. The transaction of such other business as may
properly come before the Annual Meeting or any
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED ABOVE.
--------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS. IF ANY OTHER BUSINESS IS
PRESENTED AT THE ANNUAL MEETING, INCLUDING MATTERS RELATING TO THE CONDUCT OF
THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN
ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS. AT
THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE ANNUAL MEETING.
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting
or at any adjournment thereof, then the power of said attorneys and prior
proxies shall be deemed terminated and of no further force and effect. The
undersigned may also revoke his proxy by filing a subsequent proxy or notifying
the Secretary of his decision to terminate his proxy.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting and a Proxy Statement
dated December 27, 2002.
Dated: ______________________________, 200_
________________________________ ___________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
________________________________ ___________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the enclosed card. When signing
as attorney, executor, administrator, trustee or guardian, please give your full
title. Corporation proxies should be signed in corporate name by an authorized
officer. If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.