<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Mid-State Bancshares
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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:
------------------------------------------------------------------------
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
MID-STATE BANCSHARES
To be Held May 20, 1999
TO THE SHAREHOLDERS OF MID-STATE BANCSHARES:
NOTICE IS HEREBY GIVEN that, pursuant to its Bylaws and the call of
its Board of Directors, the Annual Meeting of Shareholders of Mid-State
Bancshares ("Mid-State") will be held on Thursday, May 20, 1999, at 7:30
p.m., California Time, at the Santa Maria Airport Hilton, 3455 Skyway Drive,
Santa Maria, California, (the "Meeting") for the following purposes, as set
forth in the attached Proxy Statement:
1. To consider and vote upon a proposal to elect ten (10) persons to the
Board of Directors of Mid-State to serve for the Terms set forth next to
their respective names and until their successors have been elected and have
qualified. The following persons have been nominated by Mid-State for
election and for the Terms set forth next to their respective names:
Gracia B. Bello (Term expiring in 2001)
Clifford H. Clark (Term expiring in 2000)
A. J. Diani (Term expiring in 2001)
Daryl L. Flood (Term expiring in 2001)
William A. Hares (Term expiring in 2000)
Raymond E. Jones (Term expiring in 2002)
Stephen P. Maguire (Term expiring in 2000)
Gregory R. Morris (Term expiring in 2002)
William L. Snelling (Term expiring in 2002)
Carrol R. Pruett (Term expiring in 2002)
2. To transact any other business which may properly come before the
Meeting or any adjournments or postponements thereof.
<PAGE>
2
Only those shareholders of record at the close of business on April 15,
1999, are entitled to notice of and to vote at the Meeting or any
adjournments or postponements thereof (the "Record Date").
Section 2.11 of the Mid-State bylaws provide for the nomination of
directors as follows:
"Nominations for election of members of the Board of Directors may
be made by the Board of Directors or by any shareholder of any outstanding
class of capital stock of the Corporation entitled to vote for the election
of directors. Notice of intention to make any nominations (other than for
persons named in the notice of the meeting at which such nomination is to be
made) shall be made in writing and shall be delivered or mailed to the
president of the Corporation by the later of the close of business 21 days
prior to any meeting of shareholders called for the election of directors or
10 days after the date of mailing of notice of the meeting to shareholders.
Such notification shall contain the following information to the extent known
to the notifying shareholder: (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the
number of shares of capital stock of the corporation owned by each proposed
nominee; (d) the name and residence address of the notifying shareholder; (e)
the number of shares of capital stock of the proposed nominee, a copy of
which shall be furnished with the notification, whether the proposed nominee
has ever been convicted of or pleaded nolo contendere to any criminal offense
involving dishonesty or breach of trust, filed a petition in bankruptcy, or
been adjudged bankrupt. The notice shall be signed by the nominating
shareholder and by the nominee. Nominations not made in accordance herewith
shall be disregarded by the chairman of the meeting, and upon his
instructions, the inspectors of election shall disregard all votes cast for
each such nominee. The restrictions set forth in this paragraph shall not
apply to nomination of a person to replace a proposed nominee who has died or
otherwise become incapacitated to serve as a director between the last day
for giving notice hereunder and the date of election of directors if the
procedure called for in this paragraph was followed with respect to the
nomination of the proposed nominee.
By order of the Board of Directors
/s/ RAYMOND E. JONES
---------------------
Raymond E. Jones
April 23, 1999 Secretary
IT IS VERY IMPORTANT THAT EVERY SHAREHOLDER VOTE. WE URGE YOU TO SIGN AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU
PLAN TO ATTEND THE MID-STATE MEETING IN PERSON. IF YOU DO ATTEND THE
MID-STATE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON AT THAT
TIME. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE.
PLEASE INDICATE ON THE PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING SO WE CAN PROVIDE ADEQUATE ACCOMMODATIONS.
<PAGE>
3
[LOGO]
MID-STATE BANCSHARES
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement ("Proxy Statement") is being furnished to
shareholders of Mid-State, in connection with the solicitation of proxies by
the Board of Directors of Mid-State for use at the Annual Meeting of
Shareholders of Mid-State (including any adjournments thereof) to be held on
May 20, 1999 ("Meeting").
This Proxy Statement relates to the election of directors for the Board
of Directors of Mid-State and such other business as may properly come
before the Meeting. This Proxy Statement is dated April 15, 1999, and is
first being mailed to shareholders of Mid-State on or about April 23, 1999.
DATE, TIME AND PLACE
The Meeting will be held on Thursday, May 20, 1999, at the Santa Maria
Airport Hilton, 3455 Skyway Drive, Santa Maria, California, at 7:30 p.m.,
California Time, and any adjournment or adjournments thereof.
RECORD DATE
The Board has fixed the close of business on April 15, 1999, as the
Record Date for the determination of shareholders entitled to notice of, and
to vote at, the Meeting. Accordingly, only holders of record of shares of
Mid-State Bancshares Common Stock, no par value ("Mid-State Stock") at the
close of business on the Record Date will be entitled to vote at the
Mid-State Meeting and any adjournment thereof. As of Record Date, there were
10,097,045 shares of Stock outstanding, held by approximately 3,500
shareholders of record.
PROXIES AND REVOCABILITY OF PROXIES
A proxy card for voting at the Meeting is enclosed with the copy of this
Proxy Statement being mailed to shareholders. When a proxy card is returned,
properly signed and dated, the shares represented thereby will be voted in
accordance with the instructions on the proxy card. If a shareholder does
not attend the Meeting and does not return the signed proxy card, such
holder's
<PAGE>
4
shares will not be voted and this will have the effect of a vote "AGAINST" the
matters to be voted on at the Meeting. Shareholders are urged to mark the box on
the proxy card to indicate how the shares represented by the proxy card are to
be voted. If a shareholder returns a signed proxy card but does not indicate
how his or her shares are to be voted, such shares will be voted "FOR" the
election of directors. The proxy card also confers discretionary authority on
the individual appointed by the Board named on the proxy card to vote the shares
represented thereby on any other matter that is properly presented for action at
the Meeting. A shareholder who has given a proxy may revoke it at any time prior
to its exercise at the Meeting by delivering an instrument of revocation to the
secretary of Mid-State, by duly executing and submitting a proxy card bearing a
later date, or by appearing at the Meeting and voting in person. The mere
presence at the Meeting of the person who has given a proxy will not revoke such
proxy. In addition, brokers who hold shares of Stock as nominees will not have
discretionary authorization to vote such shares on any of the matters to be
voted thereon in the absence of instructions from the beneficial owners.
COSTS OF SOLICITATIONS OF PROXIES
Mid-State will bear its own costs in connection with this solicitation.
It is contemplated that proxies will be solicited principally through the
mails, but directors, officers and regular employees of Mid-State may solicit
proxies (for no additional compensation) by personal interview, telephone,
telex, telegram, facsimile or similar means of communication. Although there
is no formal agreement to do so, Mid-State may reimburse banks, brokerage
houses and other custodians, nominees and fiduciaries for their reasonable
expenses in forwarding these proxy materials to their principals.
OUTSTANDING SECURITIES; QUORUM
As of the Record Date, there were issued and outstanding 10,097,045
shares of Mid-State Stock. The presence, either in person or by properly
executed proxies, of the holders of a majority of the outstanding shares of
Mid-State Stock is necessary to constitute a quorum at the Meeting.
Abstentions will be counted for purposes of establishing a quorum.
VOTE REQUIRED
Shareholders are entitled to one vote at the Meeting for each share of
Mid-State Stock held of record by them on the Record Date. The candidates
receiving the highest number of affirmative votes up to the number of
directors to be elected will be elected. Cumulative voting is not permitted
under Mid-State's Articles of Incorporation.
As of the Record Date, Mid-State knew of no person who owned more than five
percent (5%) of the outstanding shares of Mid-State Stock. As of the Record
Date, directors and executive officers (a) of Mid-State beneficially owned an
aggregate of 611,064 shares of Mid-State Stock (including shares issuable
upon exercise of stock options within 60 days of the Record Date), or
approximately 6.05% of the outstanding shares of Mid-State Stock.
- -------------------
(a) Executive officers include the President and Chief Executive Officer,
Executive Vice President and Chief Credit Officer, and Executive Vice
President and Chief Financial Officer.
<PAGE>
5
ELECTION OF DIRECTORS
Mid-State's Bylaw and implementing resolutions provide for Mid-State to
have a total of ten (10) directors.
Mid-State's Articles of Incorporation provide that, at the first annual
meeting of shareholders held after Mid-State qualifies as a "listed
corporation," there will be certain changes relating to the election of
directors and voting thereon. Mid-State became a "listed corporation" at the
time of the consummation of the merger with the Bank of Santa Maria and the
listing of Mid-State's stock on the NASDAQ National Market. Specifically,
the changes relating to the election of directors and voting thereon are: (i)
cumulative voting will no longer apply in the election of directors and (ii)
the Mid-State will 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 persons will be elected at
the Meeting to a term of three years, three persons will be elected at the
Meeting to a term of two years and three persons will be elected at the
Meeting to a term of one year. At subsequent annual meetings of the
Mid-State's shareholders, a number of directors will be elected equal to the
number of directors with terms expiring at that annual meeting. The directors
so elected at these subsequent annual meetings will each be elected for a
three year term.
The persons named below have been nominated for election. In the event
that any of the nominees should be unable to serve as a director, it is
intended that proxies will be voted for the election of such substitute
nominee, if any, as shall be designated by the Board of Directors.
Management has no reason to believe that any nominee will become unavailable.
The following table sets forth certain information, as of March 31,
1999, with respect to the persons nominated by the Board of Directors for
election as directors, including the year of the annual meeting of
Mid-State's shareholders at which such nominees term will end under the
"classified board" provisions of Mid-State's Articles of Incorporation.
Mid-State knows of no arrangements, including any pledge by any person of
securities of Mid-State, the regulation of which may, at a subsequent date,
result in a change in control of the Company. There are no arrangements or
understandings by which any of the directors of Mid-State were selected.
There is no family relationships between any of the directors or executive
officers.
<PAGE>
6
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY
OWNED ON MARCH 31, 1999
-------------------------
NAME, ADDRESS(1) YEAR FIRST PERCENTAGE
AND RELATIONSHIP WITH ELECTED OR OF SHARES
THE COMPANY OF PRINCIPAL OCCUPATION FOR APPOINTED NUMBER OUTSTANDING
BENEFICIAL OWNER PAST FIVE YEARS AGE DIRECTOR TERM ( 2) OF SHARES(3) (4)
- ------------------------ ------------------------ ----- ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Gracia B. Bello Registered Pharmacist 69 1996 II 6,812 .08%
Director
Clifford H. Clark Attorney at Law 72 1960 I 22,445 .22%
Director
A. J. Diani Construction 77 1998 II 87,588 .87%
Director
Daryl L. Flood Executive Vice President/ 64 1978 II 99,532 .99%
Director Credit Administration
Mid-State Bank
(Retired)
William A. Hares Executive Vice President 63 1998 I 34,513(5) .34%
Director Mid-State Bank
(Retired)
Raymond E. Jones Executive Vice President/ 70 1990 III 56,533 .56%
Director Chief Financial Officer
Mid-State Bank
(Retired)
Stephen P. Maguire Investment Broker 48 1999 I 23,493 .23%
President, Maguire
Investments, Inc. (6)
Gregory R. Morris Insurance Broker, 58 1987 III 45,870(7) .45%
Director Morris & Garritano
Insurance
Carrol R. Pruett President and Chief
Chairman of the Board Executive Officer, 61 1967 III 122,821(8) 1.22%
and President/Chief Mid-State Bank
Executive Officer
William A. Snelling Business Manager, 67 1998 III 83,140 .82%
Director Consultant
Directors and 611,064(9) 6.05%
Executive Officers as
a group (12 persons)
</TABLE>
- ------------------
(1) The address for all persons listed is c/o Mid-State Bancshares, 1026 Grand
Avenue, Arroyo Grande, California 93420.
(2) I-Term expiring in 2000; II-Term expiring in 2001; and III-Term expiring in
2002.
(3) 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.
(4) Includes shares of common stock subject to stock option exercisable within
60 days.
(5) Includes 10,000 shares of common stock subject to stock option exercisable
within 60 days.
(6) Maguire Investments, Inc. is a corporation with securities registered under
Section 12 of the Exchange Act.
(7) Includes 31,920 shares held by Mr. Morris as Trustee for Morris & Garritano
Profit Sharing Trust, as to which Mr. Morris has sole voting and investment
power.
(8) Includes 6,697 shares of common stock subject to stock option exercisable
within 60 days.
(9) Includes 11,161 shares of common stock owned by the executive officers and
shares subject to stock option exercisable within 60 days.
<PAGE>
7
None of the Bank's directors of Mid-State other than Mr. Maguire (as
noted above) is a director of any other company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, or subject to the requirements of Section 15(d) of such Act or any
company registered as an investment company under the Investment Company Act
of 1940, whose common stock is registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended.
THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has, among others, a standing Audit Committee of
which Directors Morris (Chairman), Bello, Clark, Diani, Flood and Snelling
are members. During the year ended December 31, 1998, the Audit Committee
held a total of five (5) meetings. The purpose of the Audit Committee is to
meet with the outside auditors in order to fulfill the legal and technical
requirements necessary to adequately protect the directors, shareholders,
employees and depositors of Mid-State. The Audit Committee also meets with
Mid-State's internal auditor to review Mid-State's internal auditing program
and supervises and reviews audits of Mid-State and its departments. In
addition, it is the responsibility of the Audit Committee to recommend to the
Board of Directors the selection of independent accountants and to make
certain that the independent accountants have the necessary freedom and
independence to properly examine all Mid-State records.
Mid-State has a standing Nominating Committee that consists of the Chief
Executive Officer and three (3) non-employee directors. The Committee will
review information assembled for the purposes of selecting candidates for
nomination to membership on the Board. Following appropriate investigations,
it ascertains the willingness of selected candidates to serve and extends on
behalf of the Board, invitations to become candidates. Its recommendations
are presented to the Board at regularly scheduled meetings. The Committee
will also consider, at its regularly scheduled meetings, those
recommendations by shareholders which are submitted, along with biographical
and business experience information to the Chief Executive Officer.
The Board also has a standing Compensation Committee, of which Executive
Vice President James G. Stathos, an ex-officio member, serves as Chairman,
and Directors Diani, Flood, Jones, Morris and Pruett are members. The
primary function of the Compensation Committee, which met twelve (12) times
during 1998, is to establish proper compensation ranges for officers and
employees, delegate certain authority to management regarding salary
procedure, and determine salaries for Mid-State officers depending upon
experience, performance and contribution to the success of Mid-State.
During the fiscal year ended December 31, 1998, the Board of Directors
of Mid-State held a total of thirteen (13) meetings. All of the persons who
were directors during 1998, attended at least 75% of the aggregate of, 1) the
total number of such meetings, and 2) the total number of meetings held by
all committees of the Board on which such director served during 1998 except
for Mr. Albert L. Maguire who resigned as a director on February 10, 1999 due
to illness. Mr. Maguire who served as a director from 1961 to 1999 and also
had been Chairman of the Board, was appointed as a Director Emeritas on March
10, 1999.
<PAGE>
8
REPORT OF THE COMPENSATION COMMITTEE
Mid-State applies a consistent philosophy to compensation for all
employees, including senior management. This philosophy is based on the
premise that the achievements of Mid-State result from the coordinated
efforts of all individuals working toward common objectives. Mid-State
strives to achieve those objectives through teamwork that is focused on
meeting the expectations of customers and shareholders.
Mid-State has had a long and successful history of using a simple total
compensation program that consists of cash and equity-based compensation.
Having a compensation program that allows Mid-State to successfully attract
and retain key employees permits it to provide useful products and services
to customers, enhance shareholder value, motivate innovation, foster
teamwork, and adequately reward employees.
The goals of the compensation program are to align compensation with
business objectives and performance, and to enable Mid-State to attract and
reward executive officers whose contributions are critical to the long-term
success of Mid-State. Mid-State is committed to maintaining a pay program
that helps attract and retain the best people in the industry. To ensure
that pay is competitive, Mid-State regularly compares its pay practices with
those of other leading independent banks and sets its pay parameters based on
this review.
Executive officers are rewarded based upon corporate performance, and
individual performance. Mid-State performance is evaluated by reviewing the
extent to which strategic and business plan goals are met, including such
factors as profitability, performance relative to competitors and achievement
of corporate goals. Individual performance is evaluated by reviewing
organizational and management development progress against set objectives and
the degree to which teamwork and Mid-State values are fostered.
CEO COMPENSATION
Carrol R. Pruett has been President and Chief Executive Officer of
Mid-State since March 20, 1969. The Committee used the same compensation
policy described above for all Executive Officers to determine Mr. Pruett's
fiscal 1998 compensation.
In setting Mr. Pruett's compensation, the Compensation Committee made an
overall assessment of Mr. Pruett's leadership in achieving Mid-State's
long-term strategic and business goals. Mr. Pruett's salary reflects a
consideration of both competitive forces and Mid-State's performance.
Mid-State does not assign specific weights to these categories.
COMPENSATION COMMITTEE:
James. G. Stathos, Chair Daryl L. Flood
Raymond E. Jones Gregory Morris
Carrol R. Pruett A.J. Diani
<PAGE>
9
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Carrol R. Pruett, the Chairman of the Board, President and Chief
Executive Officer of Mid-State, and James G. Stathos, Executive Vice
President of Mid-State, each served as a member of the Compensation Committee
during 1998. Mr. Stathos also served as Chairman of the Committee. Neither
Mr. Pruett nor Mr. Stathos participated in the discussion of their respective
compensation or performance when such matters were addressed by the Committee.
EXECUTIVE COMPENSATION
No person serving as an executive officer of Mid-State or its banking
subsidiary received aggregate cash compensation of more than $100,000 during
1998, except Carrol R. Pruett, Chairman of the Board, President/Chief
Executive Officer; Thomas E. Reese, Executive Vice President/Chief Credit
Officer; James G. Stathos, Executive Vice President/Chief Financial Officer;
and William A. Hares, Executive Vice President. The Board of Directors
establishes the compensation awarded to the Executive Officers, and
determines the salaries of those executive officers based upon their
experience, performance, and contribution to the success of Mid-State. The
following table sets forth the aggregate compensation for services in all
capacities paid or accrued by Mid-State to each of these individuals.
<PAGE>
10
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
Restricted # of Stock All Other
Name of Officer and Other Annual Stock Options/ LT1P Compensation
Principal Position Year Salary Bonus Compensation Awards SAR'S(10) Payouts (11)
- ------------------- ---- --------------- ----------- ------------ ---------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carrol R. Pruett 1998 $285,360.00(12) $0 $0 $0 $0 $185,000.00 $308,043.00(15)
Chairman of the 1997 $253,039.00(13) $0 $0 $0 $0 $185,000.00 $206,250.00
Board, President, 1996 $233,614.00(14) $0 $0 $0 $0 $210,500.00 $ 2,478.31
and Chief
Executive Officer
Thomas E. Reese 1998 $136,243.00(16) $0 $0 $0 $0 $0 $158,903.00(19)
Executive Vice 1997 $126,336.00(17) $0 $0 $0 $0 $0 $104,540.00
President 1996 $119,905.00(18) $0 $0 $0 $0 $0 $ 1,981.08
James G. Stathos 1998 $133,938.00(20) $0 $0 $0 $0 $0 $158,789.00(23)
Executive Vice 1997 $126,336.00(21) $0 $0 $0 $0 $0 $104,540.00
President 1996 $119,905.00(22) $0 $0 $0 $0 $0 $ 1,981.08
William A. Hares 1998 $190,854.00(24) $285,500.00 $0 $0 $0 $0 $ 22,113.00
Executive Vice 1997 $185,000.00 $190,000.00 $0 $0 $0 $0 $ 18,285.00
President (Retired) 1996 $170,000.00 $165,000.00 $0 $0 $0 $0 $ 17,750.00
</TABLE>
- -------------------
(10) "Stock Option Table".
(11) Includes Mid-State contributions to defined contribution plans (qualified
and non-qualified, and whether or not vested.)
(12) Includes $9,600.00 accrued in 1998 but deferred pursuant to the Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan")
(13) Includes $9,500.00 accrued in 1997 but deferred pursuant to the Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan")
(14) Includes $9,500.00 accrued in 1996 but deferred pursuant to the Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan")
(15) Includes 1998 Deferred Compensation Contribution of $285,300.00.
(16) Includes $8,175.00 accrued in 1998 but deferred pursuant to the Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan")
(17) Includes $9,500.00 accrued in 1997 but deferred pursuant to the Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan")
(18) Includes $7,194.30 accrued in 1996 but deferred pursuant to the Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan")
(19) Includes 1998 Deferred Compensation Contribution of $142,650.00.
(20) Includes $8,156.00 accrued in 1998 but deferred pursuant to the Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan")
(21) Includes $7,580.16 accrued in 1997 but deferred pursuant to the Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan")
(22) Includes $7,194.30 accrued in 1996 but deferred pursuant to the Mid-State's
401(k) Plan (see "Profit Sharing 401(k) Plan")
(23) Includes 1998 Deferred Compensation Contribution of $142,650.00.
(24) Includes $10,000.00 accrued in 1998 but deferred pursuant to the
Mid-State's 401(k) Plan (see "Profit Sharing 401(k) Plan")
<PAGE>
11
STOCK OPTIONS
Mid-State's 1996 Stock Option Plan (the "Stock Option Plan"), is
intended to advance the interests of Mid-State by encouraging stock ownership
on the part of key employees and non-employee directors. The Stock Option
Plan was assumed by Mid-State in the merger with Bank of Santa Maria and
Mid-State Bank's prior 1990 Stock Option Plan was terminated as of the
Effective Date of the Merger. The Stock Option Plan was adopted by
shareholders (of BSM Bancorp) and it will expire in November 2006. The Stock
Option Plan provides for the issuance of both "incentive" and "non-qualified"
stock options to full-time salaried officers and employees of Mid-State as
well as non-qualified options to non-employee directors. All options were
granted at an exercise price of not less than one hundred percent (100%) of
the fair market value of the stock on the date of grant. Each option granted
under the Stock Option Plan expires not later than ten (10) years from the
date the option was granted. Options are exercisable in installments as
provided in individual stock option agreements; provided, however, that if an
optionee may accumulate them and exercise the same at any time thereafter
during the term of the option. As of March 31, 1999, Mid-State had options
outstanding to purchase a total of 496,256 shares of its Common Stock under
the Stock Option Plan and 172,809 shares available for grant.
The following table furnishes certain information regarding stock
options outstanding and exercised under the Stock Option Plan for (a) Mr.
Pruett, (b) Mr. Reese, (c) Mr. Stathos and (d) Mr. Hares. Each of these
executive officers was granted a stock option in 1998 for 10,000 shares at an
exercise price of $31.00 per share. Each option is a ten (10) year option
fully vested after five (5) years.
<PAGE>
12
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR, AND FISCAL YEAR-END
OPTION/SAR VALUE
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Securities
Underlying Unexercised Value of
Shares Options/SARs at FY-End In-the-Money Options/SARs
Acquired on Value Options/SARs at FY-End FY-End
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable( 25)
- ---------------- ----------- ---------- ------------------------- -------------------------------
<S> <C> <C> <C> <C>
Carrol R. Pruett 0 0 6,697 Exercisable $115,523.00
20,047 Unexercisable $173,311.00
Thomas E. Reese 0 0 2,232 Exercisable $ 38,502.00
13,349 Unexercisable $ 57,700.00
James G. Stathos 0 0 2,232 Exercisable $ 38,502.00
13,349 Unexercisable $ 57,700.00
William A. Hares 14,000 $301,000.00 15,000 Exercisable $228,750.00
10,000 Unexercisable $ 0.00
</TABLE>
PROFIT SHARING/401(K) PLAN
In 1963, the Board of Directors of Mid-State Bank entered into a Profit
Sharing Retirement Plan and Trust under a group program offered through the
California Bankers Association. The Plan covers substantially all of
Mid-State employees, and was amended in 1985 to be a combination qualified
Profit Sharing Plan (the "Profit Sharing Plan") and Savings and Retirement
Plan designed to comply with Internal Revenue Code Section 401(k) (the
"401(k) Plan"). Under the Profit Sharing Plan, the Board of Directors, in
its discretion, decides how much money, if any, will be contributed by
Mid-State to the Profit Sharing Plan depending on the amount of Mid-State's
profits for the year. Employees are not permitted to contribute to the Profit
Sharing Plan. Effective January 1, 1989, once an employee has been in service
with Mid-State three (3) full years, his interest begins to vest at a rate of
twenty percent (20%) per year for each year of service up to seven (7) years,
at which point his interest is fully vested. The maximum amount which can be
contributed by Mid-State to the Profit Sharing Plan is equal to fifteen
percent (15%) of the base salary paid to participating employees of
Mid-State. No amounts are accrued or set aside for the account of
non-employee directors. Mid-State contributed approximately $1,248,000.00 to
the Profit Sharing Plan for the year ending December 31, 1998. The amounts
allocated to individual principal officers in previous years are set forth in
the Cash Compensation Table above (see "Executive Compensation" above).
Under the 401(k) Plan, each covered employee can make voluntary contributions
to his or her account in an amount up to ten percent (10%) 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
- --------------------
(25) Unexercisable stock options represent those options granted, but not yet
fully vested. Exercisable stock options represent the fully vested portion.
Stock options vest at the rate of 20% per year from date of grant. Value of
options determined by multiplying number of shares by the difference
between the closing price on December 31, 1998 of $28.00 per share, and the
respective exercise price per share.
<PAGE>
13
the employee's contributions, up to a maximum of six percent (6%) of the
employee's salary. Mid-State's contributions to the employee's account vest
at the rate of twenty percent (20%) per year, beginning after the third full
year of service. For the year ended December 31, 1998, Mid-State contributed
approximately $396,000.00 to the 401(k) Plan.
DEFERRED COMPENSATION PLAN
The Board of Directors also adopted a Deferred Compensation Plan in
1983, which was amended in July 1996, in order to provide
performance-oriented deferred compensation for Mid-State's senior management
including its executive officers. Pursuant to the Deferred Compensation Plan,
the Board of Directors sets aside a specified amount for contribution to the
Plan, representing between two percent (2%) and four percent (4%) of
Mid-State's net profits, depending upon Mid-State's return on equity for the
previous year. A committee appointed by the Board of Directors allocates the
amount contributed to the Plan among the accounts of the participants in such
proportions as the Committee shall determine from time to time.
Contributions pursuant to the Deferred Compensation Plan become vested at the
rate of ten percent (10%) per year for each full year of service up to ten
(10) years. The funds credited to the account of each participant accrue
interest at an annual rate of return equal to ninety percent (90%) of
Mid-State's prime rate, with such interest adjusted and credited to each
account quarterly. Payment of vested amounts may be made either upon
retirement or after the fifth year of participation in the Plan, in certain
specified installments, at the election of the participant. For the year
ended December 31, 1998, Mid-State made a contribution of $570,600.00 to the
Deferred Compensation Plan for the benefit of executive officers.
CHANGE IN CONTROL AGREEMENTS
Mid-State entered into "change in control" agreements with Messrs.
Pruett, Reese and Stathos as of November 12, 1997. Each agreement provides
that, if a person who has acquired control of Mid-State terminates the
officer within 24 months after such change in control other than for cause,
disability or retirement (as such terms are defined in the agreement) or if,
within 24 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 two times his annual salary
and bonus (provided that in no event shall such amount exceed 2.99 times such
officer's "annualized includible compensation for the base period" (as
defined in the Internal Revenue Code)) 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.
<PAGE>
14
OTHER COMPENSATION
Mid-State has provided and plans to continue to provide its principal
officers with automobiles, which are not available to all employees of
Mid-State. 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, since management has concluded that the amount of any personal
benefits to any principal officer and to the principal officers as a group is
LESS than the lesser of $25,000.00 per person or ten percent (10%) of the
compensation reported under "Cash Compensation" for each such person and for
the group.
COMPENSATION OF DIRECTORS
Non-officer directors received $1,000.00 per month for their service as
directors and attendance at Board meetings. Loan Committee and Audit
Committee members received $200.00 per meeting, for attendance at such
Committee meetings. Compensation Committee members received $100.00 per
meeting, for attendance at such Committee meetings. The total amount of fees
paid to directors for attendance at Board and Committee meetings during 1998
was $123,900.00. During 1998, each director received a stock option grant
under the 1996 Stock Option Plan to purchase 10,000 shares of Mid-State
Stock. The options were granted at an exercise price of $31.00 per share,
fully vested in five (5) years, and are exercisable for ten (10) years.
PERFORMANCE GRAPH
The following table and graph display five (5) year comparative total
return performance information for Mid-State Stock, the Standard and Poors
500 Index (S&P 500), and a proxy for Southern California banks published by
SNL Securities (Southern California Proxy). The information is prepared
assuming $100.00 is invested in each of the three (3) potential investments,
five (5) 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.
<PAGE>
15
[GRAPH]
PERIOD ENDING
-----------------------------------------------------
INDEX 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- -------------------- -------- -------- -------- -------- -------- --------
Mid-State Bancshares 100.00 68.83 73.92 101.02 196.92 206.18
S&P 500 100.00 101.32 139.39 171.26 228.42 293.69
Southern California 100.00 114.08 144.69 218.43 417.66 378.80
Proxy
CERTAIN TRANSACTIONS
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.
<PAGE>
16
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires Mid-State's directors,
executive officers and ten percent (10%) or more shareholders of Mid-State's
equity securities to file with the SEC initial reports of ownership and
reports of changes of ownership of Mid-State's equity securities. Officers,
directors and ten percent (10%) or more shareholders are required by SEC
regulations to furnish Mid-State with copies of all Section 16(a) forms they
file. To Mid-State's knowledge, based solely on review of the copies of such
reports furnished to Mid-State and written representations that no other
reports were required, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its executive officers,
directors and beneficial owners of ten percent (10%) or more of Mid-State's
equity securities appear to have been met.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Mid-State has not yet selected its independent public accountants for
the fiscal year ending December 31, 1999, but intends to do so later this
year. Arthur Andersen, LLP audited Mid-State's financial statements for the
year ended December 31, 1998, and have been Mid-State's accountants since
1979. It is anticipated that a representative of Arthur Andersen, LLP will
be present at the Mid-State Meeting and will be available to respond to
appropriate questions from shareholders. All professional services rendered
by Arthur Andersen LLP during 1998 were furnished at customary rates and
terms.
PROPOSALS OF SHAREHOLDERS
Under certain circumstances, shareholders are entitled to present
proposals at shareholder meetings. Any such proposal to be included in the
Proxy Statement for Mid-State's 2000 Annual Meeting of Shareholders must be
submitted by a shareholder prior to December 26, 1999 in a form that complies
with applicable regulations.
OTHER MATTERS
Mid-State does not know of any other than that described in this
Proxy Statement which will be presented for consideration at the Meeting. If
any other matter properly comes before the respective meetings or any and all
adjournments or postponements thereof, the proxy holders named on the
accompanying proxies will vote the shares requested by such proxies in
accordance with their best judgement and as in accordance with said proxies.
MID-STATE BANCSHARES
Arroyo Grande, California /s/ RAYMOND E. JONES
April 23, 1999 ----------------------
By: Raymond E. Jones
Secretary
<PAGE>
1. ELECTION OF DIRECTORS. To elect the following ten (10) persons to the Board
of Directors of Mid-State to serve for the respective terms set forth in the
accompanying Proxy Statement and until their successors are elected and have
qualified:
Gracia B. Bello Clifford H. Clark
A. J. Diani Daryl L. Flood
William A. Hares Raymond E. Jones
Stephen P. Maguire Gregory R. Morris
Carrol R. Pruett William L. Snelling
A SHAREHOLDER MAY WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE BY LINING
THROUGH OR OTHERWISE STRIKING OUT THE NAME OF SUCH NOMINEE.
2. OTHER BUSINESS. To transact such other business as may properly come before
the Meeting and any adjournment or adjournments thereof.
Please mark
your votes as /X/
indicated in
this example
FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary) listed
/ / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
THE PROXY CONFERS AUTHORITY AND SHALL BE VOTED IN ACCORDANCE WITH THE
RECOMMENDATION OF THE BOARD OF DIRECTORS UNLESS A CONTRARY INSTRUCTION IS
INDICATED, IN WHICH CASE THE PROXY SHALL BE VOTED IN ACCORDANCE WITH
INSTRUCTIONS. IF NO INSTRUCTION IS SPECIFIED, THE SHARES REPRESENTED BY THE
PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS LISTED ON THIS PROXY. IN ALL
OTHER MATTERS, IF ANY, PRESENTED AT THE ANNUAL MEETING, THE PROXY SHALL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS WHO
WILL MAKE ANY SUCH DETERMINATION IN THEIR SOLE DISCRETION.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO USE.
The undersigned hereby acknowledges receipt of the Notice of Meeting, Proxy
Statement and Annual Report that accompanies this proxy and ratifies all lawful
actions taken by the above-named proxies.
<TABLE>
<S> <C> <C>
SIGNATURE(S) _________________________ DATE________________ Number of Shares _________
_________________________ ________________ I (We) will [ ] will not [ ] attend the Annual Meeting in Person
</TABLE>
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. 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 ^
<PAGE>
REVOCABLE PROXY - MID-STATE BANCSHARES
ANNUAL MEETING OF SHAREHOLDERS - MAY 20, 1999
The undersigned shareholder(s) of Mid-State Bancshares ("Mid-State")
hereby appoints, constitutes and nominates Carrol R. Pruett, Raymond E. Jones
and James G. Stathos, and each of them, the attorney, agent and proxy of the
undersigned, with full power of substitution, to vote all shares of Mid-State
which the undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held at the Santa Maria Airport Hilton, 3455 Skyway Drive,
Santa Maria, California on May 20, 1999 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 follows:
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^ FOLD AND DETACH HERE ^
