<PAGE> 1
SCHEDULE 14A
(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:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FIRST INDEPENDENCE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] 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> 2
FIRST INDEPENDENCE
CORPORATION
44 MICHIGAN AVE., DETROIT, MICHIGAN 48226
TELEPHONE 313-256-8400
May 28, 1999
To Our Shareholders:
You are cordially invited to attend the 1999 Annual Meeting of
Shareholders of First Independence Corporation, which will be held at 6:00 p.m.
on Thursday, July 1, 1999, at the Livernois Branch office at 12200 Livernois,
Detroit, Michigan.
This letter is accompanied by a notice of annual meeting and proxy
statement and a proxy card. The Corporation's Annual Report on Form 10-KSB for
the year ended December 31, 1998, as filed with the Securities and Exchange
Commission, also is enclosed.
At the meeting, shareholders will: 1) elect eight (8) directors to
serve for one year and until their successors are duly elected and qualified, 2)
vote on a proposal to amend the Corporation's Articles of Incorporation to
effect a one-for-sixty reverse stock split (the "Reverse Stock Split") with
respect to the Corporation's common stock, $1 par value per share (the "Common
Stock"), and 3) transact such other business as may properly come before the
meeting or any adjournment of it.
The enclosed notice of annual meeting and proxy statement should be
read carefully. They describe matters which are important for the Corporation
and its subsidiary, the Bank. Please sign and date the enclosed proxy card and
mail it promptly in the return envelope whether or not you plan to attend the
meeting. If you are present at the meeting and wish to vote in person, you may
withdraw your proxy and vote in person.
Very truly yours,
Don Davis
Chairman of the Board
<PAGE> 3
IT IS IMPORTANT THAT YOUR SHARES BE VOTED AT THE MEETING. PLEASE
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT TO THE
CORPORATION.
FIRST INDEPENDENCE CORPORATION
44 MICHIGAN AVENUE
DETROIT, MICHIGAN 48226
(313) 256-8400
--------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, JULY 1, 1999
The 1999 Annual Meeting of the shareholders of First Independence
Corporation will be held at the Livernois Branch office of First Independence
National Bank of Detroit, 12200 Livernois, Detroit, Michigan, on Thursday, July
1, 1999, at 6:00 p.m., for the following purposes:
(1) To elect eight (8) directors to hold office until the next annual
meeting and until their successors are elected and qualified;
(2) To vote on a proposal to amend the Corporation's Articles of
Incorporation to effect a one-for-sixty reverse stock split (the "Reverse Stock
Split") with respect to the Corporation's common stock, $1 par value per share
(the "Common Stock"); and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Information concerning these matters is set forth in the accompanying
Proxy Statement. Only those common shareholders of record at the close of
business on April 30, 1999, are entitled to notice of and to vote at the Annual
Meeting.
IN ORDER TO ASSURE THAT YOUR SHARES WILL BE REPRESENTED AND VOTED AT
THE ANNUAL MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE RETURN ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
Don Davis
Chairman of the Board
May 28, 1999
<PAGE> 4
FIRST INDEPENDENCE CORPORATION
44 MICHIGAN AVENUE
DETROIT, MICHIGAN 48226
(313) 256-8400
--------------
PROXY STATEMENT
DATED MAY 28, 1999
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
JULY 1, 1999
GENERAL INFORMATION
This Proxy Statement and the accompanying form of proxy and annual
report on Form 10-KSB as filed with the United States Securities and Exchange
Commission are furnished in connection with the solicitation of proxies by the
Board of Directors of First Independence Corporation (the "Corporation") for use
at the annual meeting of shareholders to be held at the Livernois Branch Office,
12200 Livernois, of First Independence National Bank of Detroit, Detroit,
Michigan, at 6:00 p.m. on Thursday, July 1, 1999 (the "Annual Meeting"). The
annual report on Form 10-KSB is incorporated into this Proxy Statement by
reference, particularly Management's Discussion and Analysis on Plan of
Operations (pages 7-20), Report of Independent Accountants (page 25), and
Financial Statements (pages 26-48).
This Proxy Statement is being mailed on or about May 28, 1999 to all
holders of record of Common Stock as of the close of business on April 30, 1999.
The cost of this solicitation will be borne by the Corporation. In addition to
solicitation by the use of mail, the directors, and officers of the Corporation,
without additional compensation, may solicit proxies personally or by telephone
or mail. A shareholder giving a proxy in connection with this solicitation has
the power to revoke it at any time prior to its exercise at the Annual Meeting
either by written notice received by the Corporation (Attn: Secretary) at the
address shown above at least 24 hours before the Annual Meeting or by
announcement of revocation at the Annual Meeting.
The purposes of the Annual Meeting are to:
(1) Elect 8 directors to serve until the next annual meeting of
shareholders and until their successors are elected and
qualified;
(2) To vote on a proposal to amend the Corporation's Articles of
Incorporation to effect a one-for-sixty reverse stock split
(the "Reverse Stock Split") with respect to the Corporation's
common stock, $1 par value per share (the "Common Stock"); and
(3) Transact such other business as properly may come before the
meeting or any adjournment thereof.
As of April 30, 1999, there were 336,760 shares of the Corporation's
common stock, par value $1.00 per share, outstanding, 4,000 shares of Class A
Preferred Stock, par value $100.00 per share, 3,200 shares of Class B Preferred
Stock, par value $100.00 per share, outstanding, 1,500 shares of Class C
Preferred Stock, Series MI-1, no par value, outstanding, and 395.797 shares of
Class C Preferred Stock, Series 1994-1, no par value, outstanding. Those common
shareholders of record at the close of business on April 30, 1999, are entitled
to vote at the meeting.
1
<PAGE> 5
As of that date, there were approximately 2,100 record holders of the
Corporation's common stock. Each share of common stock is entitled to one vote
on each matter presented.
OWNERSHIP OF THE CORPORATION'S EQUITY SECURITIES
The following table furnishes information with respect to the
beneficial owners of more than five percent of any class of the Corporation's
equity securities as of April 30, 1999.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Beneficial Percent of
Title of Class Beneficial Owner Ownership* Class
- -------------- ---------------- ---------- -----
<S> <C> <C> <C>
Common Don Davis 211,376 62.8
Stock 5840 Second Avenue
Detroit, Michigan 48202
Common First Independence Corp. 36,363 10.80
Stock Employee Stock
Ownership Trust
44 Michigan Avenue
Detroit, Michigan
Class A Don Davis 3,000 75.00
Preferred 5840 Second Avenue
Detroit, Michigan 48202
Class A Tower Ventures, Inc. 1,000 25.00
Preferred 12655 North Central Expressway
Dallas, TX 75243
Class B Dearborn Capital Corp. 2,000 62.50
Preferred P.O. Box 1729
Dearborn, Michigan
Class B Hudson-Webber Foundation 1,200 37.50
Preferred 333 West Fort Street
Detroit, Michigan
Class C Michigan State Housing 1,500 100.00
Preferred Development Authority
(Series MI-1) 1200 6th Street
Detroit, Michigan 48226
Class C Blue Cross-Blue Shield of Michigan 91.433 23.1
Preferred 600 E. Lafayette
(Series 1994-1) Detroit, Michigan 48226
Class C Dearborn Capital Corp. 89.000 22.5
Preferred P.O. Box 1729
(Series 1994-1) Dearborn, Michigan
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Beneficial Percent of
Title of Class Beneficial Owner Ownership* Class
- -------------- ---------------- ---------- -----
<S> <C> <C> <C>
Class C Don Davis 59.000 14.9
Preferred 5840 Second Avenue
(Series 1994-1) Detroit, Michigan 48202
Class C Tower Ventures 45.917 11.6
Preferred 12655 North Central Expressway
(Series 1994-1) Dallas, TX 75243
Class C G-Tech, Inc. 25.722 6.5
Preferred 55 Technology Way
(Series 1994-1) West Greenwich, RI 02817
Class C Motor Enterprises 39.375 9.9
Preferred 3044 W. Grand Blvd.
(Series 1994-1) Detroit, Michigan 48202
Class C Hudson-Webber Foundation 23.600 6.0
Preferred 333 West Fort Street
(Series 1994-1) Detroit, Michigan
Class C AAA of Michigan 21.750 5.5
Preferred 1 Auto Club Drive
(Series 1994-1) Dearborn, Michigan 48126
- ----------------------------------------------------------------------
* Each owner possesses sole voting and investment power with respect to the shares shown except as follows.
The number of shares of Common Stock shown for Mr. Davis includes 3,969 shares credited to his account
under the First Independence Corporation Employee Stock Ownership Plan as of December 31, 1998, for
which he only has voting power. The shares shown for the First Independence Employee Stock Ownership
Trust are voted by the independent Trustee, except that participants in the First Independence Corporation
Employee Stock Ownership Plan are entitled to direct the Trustee as to the manner of voting shares
allocated to their accounts. As of April 30, 1999, all shares held by the Trust were allocated to participant's
accounts. Shares of preferred stock are not entitled to vote in the election of directors, except that shares
of Class A Preferred Stock may elect additional directors in the case of certain dividend arrearage which
does not currently apply.
</TABLE>
PROPOSAL 1. ELECTION OF DIRECTORS
NOMINEES FOR BOARD OF DIRECTORS
The Board has established the number of directors at eight, but the
Board may change the number from time to time. The eight persons named below
have been nominated by the Board of Directors for election as directors to serve
until the next annual meeting and until their successors are elected and
qualified. The Board of Directors of the Corporation is not aware of any other
nominations for director to be made at the Annual Meeting.
3
<PAGE> 7
It is the intention of the persons named in the enclosed proxy card to
vote such proxies for the election of the nominees named in this Proxy Statement
unless the proxies contain instructions to the contrary, in which case they will
be voted pursuant to such instructions. The Directors of the Corporation intend
to vote all shares beneficially owned by them for the nominees named herein.
Given that the Directors as a group beneficially own approximately 64.6% of the
outstanding shares of Common Stock entitled to vote, such a vote would elect the
nominees notwithstanding the votes cast by other shareholders.
All of the nominees for election to the Board of Directors are citizens
of the United States and are currently members of the Corporation's Board and of
the Board of Directors of the Corporation's subsidiary bank, First Independence
National Bank of Detroit (the "Bank"). If any nominee for any reason is unable
or for good cause refuses to serve or be elected, which is not anticipated, the
persons named in the enclosed form of proxy intend to vote for such other
nominees, if any, as may be recommended by the Board of Directors.
The information below is presented as of April 30, 1999, and is based
on information provided by the persons named.
<TABLE>
<CAPTION>
Name and Principal Bank Shares of Common
Occupation or Employment Director Stock of Corporation Percent of
for Last Five Years Since (a) Age Beneficially Owned (b) Common Stock
--------------------- --------- --- ---------------------- ------------
<S> <C> <C> <C> <C>
Barry Clay ............................... 1996 37 824 *
President, Barclay Mortgage Funding Group
(1997 to present), mortgage lender; Team
Leader, Capacity Strategy and Production
Planning Department (1994-1997).
Don Davis ................................ 1980 60 211,376(b) 62.8
Chairman of the Board of the
Corporation and of the Bank;
President, United Sound Systems,
Inc. and President, Conquistador/
Groovesville Music, Inc.,
record producers and recording
studios; President, Liberty Risk
Management, Inc., insurance
agency; President Mahogany Investment
Advisors, investment advisory firm.
William Fuller......................... 1999 55 379 *
President of the Corporation and of
the Bank since 1998; Executive Vice
President, Shore Bank Corporation,
(1995-1998); Senior Vice President,
Shawmut Bank (1989-1995). Member of
Board of Directors of One Stop Capital
Shop, Metro Matrix, Greater Detroit
Area Health Council, and Eureka Detroit,
all community service organizations.
Georgis I. Garmo ......................... 1996 60 334 *
President, Garmo & Co., P.C.,
Certified Public Accountants (1975 -
Present).
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Dr. Charles E. Morton.................... 1969 73 3,700(b)(c) 1.1
Emeritus Pastor, Metropolitan Baptist
Church; Adjunct Professor of
Philosophy, Oakland University.
Jamal Shallal ........................... 1996 59 334 *
Executive Vice President, Lincorp
Research, Inc., a management consulting
and investment management firm (1985 -
Present).
Geneva J. Williams........................ 1997 50 334 *
Executive Vice President and Chief
Operating Officer, United Way Community
Services, Detroit, Michigan (1995-present);
President and Chief Executive Officer,
United Community Services of Metropolitan
Detroit (1991-1995)
Alan C. Young ............................ 1996 44 334 *
Managing Director, Alan C. Young &
Associates, P.C. (1983 - Present).
All directors and officers
as a group (9 persons including 219,332 65.1
those named above)
</TABLE>
(a) The Corporation was formed in 1986 and the incumbent directors have
been directors of the Corporation since its formation except those
persons for which a year after 1986 is shown.
(b) Each director possesses sole voting and investment power with respect
to the shares shown unless indicated otherwise below. The numbers of
shares shown for Mr. Don Davis include 3,969 shares allocated to his
account under the First Independence Corporation Employee Stock
Ownership Plan for which he has only sole voting power. The number of
shares shown for Dr. Morton includes 300 shares held jointly with his
wife in which they share voting and investment power.
(c) Includes option to purchase up to 3,000 shares of Common Stock at $5
per share for a five-year period ending May 23, 2000.
*Less than one percent.
EXECUTIVE OFFICERS
In addition to Mr. Don Davis listed in the table above, executive
officers of the Corporation, as of December 31, 1998, included William Fuller,
President of the Corporation and the Bank since 1998, Rose Ann Lacy, Senior Vice
President and Chief Financial Officer of the Corporation since 1989 and of the
Bank since 1986, who beneficially owns 1,717 shares of Common Stock and John
Boudreau, Executive Vice President of the Bank since 1997; Senior Vice President
- - Administration (1994-1997). Prior to joining the Bank, Mr. Boudreau was
Finance Manager at Recall Management Corporation, Boston, MA (1991-1994). All
the executive officers are United States citizens.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table presents the cash compensation paid to the
Corporation's officers whose total annual salary and bonus exceeded $100,000 in
1996 - 1998.
<TABLE>
<CAPTION>
Principal
Name Position Year Salary Bonus
- ---- -------- ---- ------ -----
<S> <C> <C> <C> <C>
Don Davis Chairman of the 1998 $175,000 $20,000
Board of Directors 1997 $148,293 -
of the Corporation 1996 $131,462 -
and the Bank; Interim
President and Chief
Executive Officer
since 1996
John Boudreau Executive Vice 1998 104,991 $12,000
President of the Bank
and Chief Operating
Officer
</TABLE>
Mr. Fuller and the Bank entered into an employment contract dated July
20, 1998 for two years under which he will be paid $130,000 in the first year of
employment plus $15,000 when he was appointed President by the Board of
Directors. He will be paid $135,000 in the second year of the contract. In
addition, Mr. Fuller receives an automobile allowance of $300 per month and the
same employee benefits afforded to all other employees of the Bank. In the event
of an involuntary termination of Mr. Fuller's employment by the Bank, Mr. Fuller
will be paid sixty days' compensation at his then-existing base rate.
The Corporation and the Bank do not presently have any long-term
incentive compensation plans, except the 1995 Employee Stock Option Plan and a
401-K retirement plan which are described below. The Corporation and the Bank
did not grant any stock options in 1996 and no officer or director exercised any
options previously granted to him or her.
The Employee Stock Option Plan was adopted in 1995. It authorizes the
issuance of up to 67,352 shares of Common Stock to key salaried employees and
directors of the Corporation as an incentive to such key employees. Options
granted under the Plan may be incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986 or they may be non-qualified
options which do not meet the requirements of that section. The Plan is
administered by a stock option committee. At April 30, 1999, there were 64,352
shares available for option under the Plan and options were outstanding and
unexercised for 3,000 shares.
The Corporation had an Employee Stock Ownership Plan which is qualified
under Section 401(a) of the Internal Revenue Code of 1986, but it was suspended
in 1996. There have been no contributions to the plan since 1991 and no new
employees have become participants in the Plan since 1994. All shares of stock
in the plan are allocated to the accounts of the participants. Unvested shares
forfeited by terminated employees are reallocated among all Plan participants as
of the last day of the year of forfeiture in the proportion which each
participant's annual compensation bears to the total annual compensation of all
Plan participants. As of December 31, 1998, there were 3,969 shares allocated
under the Plan to Don Davis' account.
The Bank adopted a 401(k) Plan in 1998 in which all full-time employees
may participate after one year of employment. Employees may contribute up to 15%
of their compensation into the plan each year, but not in excess
6
<PAGE> 10
of $10,000 per year. The maximum amount of contribution to the Plan is
established by law and regulations. The Bank contributes a matching amount on
behalf of each participating and contributing employee equal to 50% of the
employee's contribution each year, but not exceeding 3% of the employee's
salary. Investments in the Plan are directed by each participating employee and
they have a range of investment options including stock, bond and guaranteed
interest investments.
Directors who were not officers were paid the following fees for Bank
Board of Directors and Committee meetings: a monthly stipend of $200; a meeting
fee of $240 for each Board meeting; and $100 for each Committee meeting. No fees
are paid for attendance at the Corporation's Board or Committee meetings.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The members of the Corporation's Board of Directors also serve as the
members of the Board of Directors for the Bank. The Board of Directors performed
the function of nominating directors and compensation review in 1998. There was
not a separate committee performing these functions. The Committees described
below also function in a similar dual capacity.
The Audit Committee during 1998 was composed of Dr. Charles E. Morton
and Messrs. Shallal, Young and Garmo. The Audit Committee selects the
Corporation's independent auditors, reviews the results of prior audits and
considers issues concerning the current audit. The Committee also considers
procedures for internal control and audits. During 1998, the Committee held 6
meetings.
The Executive/Compliance Committee was composed of Don Davis, Dr.
Charles Morton, Georgis Garmo and Barry Clay. The Executive Committee at times
functions as a loan committee, reviewing loan applications and delinquencies and
approving loan applications. The Committee also functions in lieu of the
Corporation's and the Bank's Board between Board meetings. The Executive
Committee met 4 times in 1998.
The Funding Management Committee is responsible for reviewing and
maintaining a proper balance between the Bank's liabilities and its assets. The
Committee reviews liquidity, funding needs for loans, the balance between the
Bank's investment portfolio, loans, Federal Funds and other assets, as well as
the condition of liabilities, particularly the terms of deposits. The Committee
met 5 times in 1998.
In 1998, the Board of Directors of the Corporation met 10 times and the
Board of the Bank met 10 times. Each incumbent member of the Board, attended at
least 75 percent of the total number of meetings held by the Boards and
Committees of which he or she was a member during 1998, except for Mr. Garmo and
Ms. Williams.
INTEREST IN CERTAIN TRANSACTIONS
In the ordinary course of its business, the Bank had, during 1998, and
expects to have in the future, transactions with some of its directors and
officers, and their families and the companies with which they are associated.
All such transactions, which included commitments for loans and loans made by
the Bank, were based on terms, including rates, collateral and repayment terms,
substantially the same as those prevailing at the time for comparable
transactions with other persons, and in the opinion of the Board of Directors
and the management of the Bank such transactions did not and do not involve more
than the normal risk of collectibility or present other unfavorable features.
PROPOSAL 2. REVERSE STOCK SPLIT--1 SHARE FOR 60 SHARES
GENERAL
The holders of the Corporation's Common Stock are being asked to approve
a one-for-sixty reverse stock split of the Common Stock of the Corporation (the
"Reverse Stock Split").
7
<PAGE> 11
The Board of Directors believes that it would be in the best interests
of both the Corporation and its stockholders to effect the Reverse Stock Split
of one share of newly issued share of Common Stock ("New Common Stock") for each
sixty (60) shares of the Corporation's presently issued and outstanding Common
Stock. This amendment has been adopted unanimously by the Board of Directors
subject to approval of the Corporation's stockholders. Approval will require the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock. The Board of Directors reserves the right, notwithstanding
stockholder approval and without further action by the stockholders, not to
proceed with the Reverse Stock Split, if, at any time prior to filing the
amendment with the Secretary of State of the State of Michigan, the Board of
Directors, in its sole discretion, determines that the Reverse Stock Split is no
longer in the best interests of the Corporation and its stockholders.
REASONS FOR THE PROPOSED REVERSE STOCK SPLIT.
There is not a market maker for the Corporation's Common Stock and there
is no trading market for the Corporation's Common Stock and there has not been
one for 10 years. The Corporation has 336,760 shares of Common Stock outstanding
owned by over 2,100 shareholders, but 62.8% of the stock is owned by one person,
Don Davis, and 10.8% of the Common Stock is held by an Employee Stock Ownership
Plan. Approximately 1,800 shareholders have fewer than sixty shares of Common
Stock. However, because there is no trading market for the Common Stock, one of
the principal advantages of being a "public" company is not realized by the
Corporation's shareholders. There is no expectation that a trading market for
the Corporation's Common Stock will develop in the foreseeable future
particularly in view of the fact that fewer than one-third of the shares could
be traded in any case. Thus, the Board of Directors believes that the
shareholders will benefit from a purchase of outstanding small lots of Common
Stock.
As a result of the relatively large number of shareholders, management
of the Corporation estimates that it incurs approximately $70,000 per year in
legal, accounting, stock registrar, printing and mailing costs. Eliminating
these costs would contribute materially, in the opinion of the Board of
Directors, to the Corporation's profits. Therefore, the Board of Directors has
proposed the Reverse Stock Split in order to provide cash to small shareholders
and to reduce the number of shareholders significantly.
During the period since December 31, 1996, Don Davis has purchased
14,133 shares of the Common Stock at prices ranging from $5.00 to $7.00 per
share in negotiated transactions initiated by shareholders who desired to sell
their Common Stock. These transactions constitute almost all known transactions
in the Common Stock during the more than two years in that period. Management of
the Company is not aware of any present efforts of any persons to accumulate
Common Stock or to obtain control of the Company, except that Mr. Davis has been
a willing buyer of the Corporation's Common Stock. The proposed Reverse Stock
Split is not intended to be an anti-takeover device. The amendment is being
sought to reduce costs by reducing the number of shareholders and to provide a
reasonable means for small shareholders to obtain cash for their investment.
RESULTS OF THE PROPOSED REVERSE STOCK SPLIT.
It is the Corporation's expectation that the Reverse Stock Split will
result in the Corporation's Common Stock no longer being registered under
Section 12(g) of the Securities Exchange Act of 1934. This will result in the
Corporation no longer being required to file annual or quarterly reports with
the Securities and Exchange Commission. The elimination of legal and accounting
costs associated with quarterly reporting and the reduced costs of mailings to
fewer shareholders are expected to yield approximately $70,000 of savings in
operating costs to the Bank and the Corporation each year. This increase in
profitability will raise capital by a like amount, increasing the soundness of
the Bank and providing higher capital base for growth.
The Corporation is authorized to issue one million shares of Common
Stock, $1.00 par value, of which 336,760 shares were issued and outstanding at
the close of business on April 30, 1999. As proposed, and if effected, the
Reverse Stock Split would reduce the number of issued and outstanding shares of
Common Stock to
8
<PAGE> 12
approximately 5,129 shares, leaving the remainder of the Common Stock authorized
and available for issuance. The Board does not presently have any plans for
issuance of additional shares of Common Stock.
The proposed transaction will reduce the number of shareholders from
approximately 2,100 to 275. It will increase the percentage of Common Stock
ownership of each continuing Common Stockholder an average of about 9% over the
shares they previously owned. Thus, Don Davis' share of outstanding Common Stock
will increase from 62.8% to approximately 68.6%. If a person owns 1% of the
Common Stock outstanding before the Reverse Stock Split (3,367 shares), such a
person would own approximately 1.1% of the outstanding Common Stock after the
Reverse Stock Split. The par value of the new Common Stock will be $1.00 per
share and the old Common Stock also had a par value of $1.00 per share. No
rights accruing to continuing holders of Common Stock would be affected by the
proposed transaction.
In connection with the Reverse Stock Split, management estimates that
approximately 28,965 shares of the old Common Stock (pre-Reverse Stock Split)
will be redeemed. These are primarily the fewer than 60 shares of the old Common
Stock which are owned by individual shareholders before the Reverse Stock Split
and which would yield only a fractional share of the new Common Stock after the
transaction. Approximately 1800 shareholders own fewer than 60 shares of stock
(an estimated average of approximately 14 shares per person) and they would
receive no new Common Stock, only payment for their shares at the rate of $10.00
per share of old Common Stock ($600.00 per whole share of new Common Stock). The
redeemed fractional shares are expected to be equivalent to approximately 483
shares of the new Common Stock. The total cash required for this redemption is
expected to be approximately $289,800. (It is estimated that there will be about
$55,000 of additional expenses associated with the transaction.) In the Board's
opinion, this will not result in a material reduction in the Bank's capital. Its
equity capital ratios at April 30, 1999, and December 31, 1999, before the
Reverse Stock Split and after adjusting for it on a proforma basis are shown
below based on average assets during the respective periods. Generally, a bank
with these levels of capital is considered "well capitalized" pursuant to
regulations of the Comptroller of the Currency.
<TABLE>
<CAPTION>
April 30, 1999 December 31, 1998
(unaudited)
-------------- -----------------
<S> <C> <C>
Actual 5.7% 5.75%
Pro Forma, Adjusted
for Reverse Stock
Split (unaudited) 5.5% 5.55%
</TABLE>
DESCRIPTION OF COMMON STOCK
There are 336,760 shares of Common Stock outstanding. The Common Stock
is subordinate in right of liquidation to $720,000 (7,200 shares) of Class A and
Class B Preferred Stock and 1,500 shares of Class C Preferred Stock, Series MI-1
($1,500,000) and 395.797 shares of Class C Preferred Stock, Series 1994-1
($395,797).
No dividends have been paid on the Common Stock in the past 10 years. In
1991, pursuant to the exercise of supervisory authority over the Corporation by
the Federal Reserve Bank of Chicago, the Board of Directors adopted a resolution
providing that it will not declare dividends or distributions to any
shareholders without prior approval of the Federal Reserve Bank of Chicago. The
resolution remains in effect, and prior approval of the Federal Reserve Bank of
Chicago was received for making the redemption payments of fractional shares of
new Common Stock after the Reverse Stock Split.
The Corporation has no business of its own and receives its revenues
from the Bank in the form of dividends. The Bank is subject to regulation of the
Comptroller of the Currency pursuant to the National Bank Act. That Act limits
payment of dividends (12 USC ss.60) to the net profits of a bank remaining after
10% of the net profits of each
9
<PAGE> 13
half year of operations are transferred to capital surplus, and the dividend
paid in any calendar year may not, without the prior approval of the
Comptroller, exceed the net profits of the current year, plus the net profits of
the two preceding years (less the required transfers to surplus). 12 USC ss.56
provides that dividends may not be paid if undivided profits have been depleted
by losses or otherwise. In other words, dividends may be paid only from net
earnings and not from the Bank's capital.
LIQUIDATION AND PRICE OF FRACTIONAL SHARES
No scrip or fractional certificates will be issued in connection with
the Reverse Stock Split. Stockholders who ostensibly would be entitled to
receive fractional shares because they hold a number of shares of Common Stock
not evenly divisible by sixty (60) will be entitled, upon surrender to the
Exchange Agent of certificates representing such shares, to receive a cash
payment equal to $10.00 for each share of Common Stock outstanding before the
Reverse Stock Split that was not converted into a new share of Common Stock.
Payment for fractional shares of new Common Stock based on a price of
$600.00 per share (equivalent to $10.00 for each old share of Common Stock that
is not converted into new shares of Common Stock) was determined by the Board of
Directors after evaluating the Corporation's historic earnings record, its book
value, the nature of its assets, the limited trading market for its stock, and
the stock prices and performance of other community banks and holding companies
considered comparable to the Corporation and its subsidiary Bank. For example,
the book value of one share of Common Stock was $9.39 per share at December 31,
1998, but only $6.57 per share at December 31, 1997. Earnings per common share
were $2.82 in 1998 and $2.68 in 1997. The Board also consulted with Roney
Capital Markets, a division of Roney & Co., which is a wholly owned subsidiary
of Bank One. Roney Capital Markets issued an opinion to the effect that the
price of $10.00 per share of old Common Stock ($600.00 per share of new Common
Stock) is fair to the shareholders of the Corporation from a financial point of
view. In selecting Roney Capital Markets to render the opinion, the Board
solicited proposals from three unaffiliated investment banking firms and
considered price, expertise, understanding of community banking, and experience
in the banking industry. Roney Capital Markets is highly experienced in valuing
banks and bank holding companies and enjoys a reputation as an expert in
investment banking in the field of banks and banking. They have been engaged in
scores of bank valuations, financings, mergers and combinations in the midwest.
There has been no other material business relationship in the past two years
between the Corporation or its affiliates and Roney Capital Markets and its
affiliates. The report and opinion of Roney Capital Markets will be available
for inspection and copying at the Corporation's and Bank's principal executive
offices during its regular business hours by any interested equity security
holder of the Corporation or his representative who has been so designated in
writing.
There can be no assurance that a purchaser of Common Stock of the
Corporation before the Reverse Stock Split actually would pay $10.00 per share.
In fact, a purchaser might be willing to pay more or may only be willing to pay
less than that amount. There also is no assurance that a purchaser of shares in
the Corporation actually would pay $600.00 per share of the new Common Stock
merely because it is the arithmetic equivalent of the estimated value of $10.00
per share of the old Common Stock multiplied by 60 shares of stock ($10.00 x
60). "Market" prices could be lower or higher. There is not, and is not expected
to be a trading market for the Common Stock and there has not been one in the
past 10 years.
If the proposal is approved and effected, stockholders will be
encouraged to surrender their certificates to the Exchange Agent for
certificates evidencing whole shares of the Common Stock plus cash payment for
any fractional interests.
FUNDING THE REVERSE STOCK SPLIT
The Corporation will obtain the funds necessary to pay cash for the
fractional shares resulting from the proposed Reverse Stock Split from the Bank.
It is expected that approximately $289,800 will be needed to pay for such
fractional shares, plus approximately $55,000 for administrative expenses such
as investment banking fees, transfer agent costs, new stock certificates and
legal and accounting fees. The Bank's Board of Directors intends to
10
<PAGE> 14
declare and pay a dividend to the Corporation of approximately $350,000 to fund
the fractional share payments plus transaction expenses.
The Corporation has obtained the prior approval of the Federal Reserve
Bank of Chicago for the Reverse Stock Split and the resulting redemptions of
fractional shares of Common Stock. This prior approval is required pursuant to
the 1991 Formal Resolution between the Corporation and the Federal Reserve Bank
of Chicago.
FINANCIAL INFORMATION
The Corporation's audited financial statements for the years ended
December 31, 1998 and 1997 are included in the Annual Report to stockholders on
Form 10-KSB as sent to the stockholders of the Corporation and as filed with the
United States Securities and Exchange Commission. Those financial statements and
the notes thereto are found in the Form 10-KSB at pages 21-43 of the 10-KSB and
"Management's Discussion and Analysis of Operations" is set forth in the Annual
Report, Form 10-KSB at pages 7-18. The Financial Statements and Management's
Discussion and Analysis of Operations are incorporated herein by reference.
The following unaudited pro forma condensed consolidated balance sheet
and income statement for the Corporation reflects the Reverse Stock Split
transaction as if it were consummated as of and for the year ended December 31,
1998, assuming that $350,000 would be expended for the purchase of fractional
shares and expenses of the Reverse Stock Split.
PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of dollars)
<TABLE>
<CAPTION>
December 31, 1998
ASSETS
<S> <C>
Total cash and cash equivalents (1),(2) $ 27,617
Total securities 52,756
Net loans 38,382
Other assets 4,514
--------
Total assets $123,269
========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities $117,846
--------
Shareholders' equity:
Preferred stock 2,616
Common stock, $1 par value; 1,000,000 shares authorized;
5,130 shares issued and outstanding (1) 5
Capital surplus (1) 2,369
Retained earnings (2) 363
Unrealized gain on securities available for sale, net of tax 70
--------
Total shareholders' equity 5,423
--------
Total liabilities and shareholders' equity $123,269
========
</TABLE>
11
<PAGE> 15
PRO FORMA
CONDENSED CONSOLIDATED INCOME STATEMENT
(In thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
For the year ended
December 31, 1998
-----------------
<S> <C>
Total interest income $ 7,442
Total interest expense 2,546
--------
Net interest income 4,896
Provision for loan losses 255
--------
Net interest income after provision for loan losses 4,641
Total noninterest income 1,073
Total noninterest expense 4,789
--------
Income before federal income taxes 925
Federal income tax expense
--------
Net income (2) 925
Preferred stock dividends 34
--------
Income attributable to common stock $ 891
========
Basic and full diluted earnings per common share $ 173.69
========
Book value per share $ 547.17
========
Earnings to Fixed Charges, including deposit interest (3) 1.36
Earnings to Fixed Charges, excluding deposit interest (3) 2.40
- -------------------------
</TABLE>
Pro forma adjustments
(1) Total cash and cash equivalents was reduced by $350,000 to give effect
to the costs of the Reverse Stock Split and the repurchase of fractional
shares; common stock was reduced by $332,000 and capital surplus was
increased by $49,000 to give effect to the repurchase of the fractional
shares (28,965 pre reverse split shares or 483 post reverse split shares
valued at $10.00 per share before the reverse split or $600.00 after the
reverse split).
(2) Net income and retained earnings were reduced by $21,000, or 6% of
$350,000, to give effect to reduced earnings because of the reduction in
cash and cash equivalents as a result of the repurchase of fractional
shares.
(3) At December 31, 1998, the ratio of earnings to fixed charges was 1.37,
including deposit interest, and it was 2.43, excluding deposit interest.
RESOLUTIONS TO EFFECT THE REVERSE STOCK SPLIT
To effect the one-for-sixty reverse stock split of the Common Stock of
the Corporation, shareholder approval is sought to amend various portions of
Article III of the Corporation's Articles of Incorporation. The effect of all of
the amendments is merely to accomplish the Reverse Stock Split. The numbers of
shares of Common Stock or other classes of stock authorized to be issued are not
increased or decreased and the rights of continuing shareholders of any class of
stock will remain the same as they are before the Reverse Stock Split
transaction.
12
<PAGE> 16
The first paragraph of Article III of the Corporation's Articles of
Incorporation relating to the authorized capital stock will be replaced with the
following two paragraphs:
ARTICLE III
"The authorized amount of capital stock of this Corporation shall be
1,000,000 shares of common stock of the par value of $1.00 each, 150,000
of which shares may be issued without voting rights; 4,000 shares of
Class A Preferred Stock of the par value of $100 each; 3,200 shares of
Class B Preferred Stock of the par value of $100 each; and 100,000
shares of Class C Preferred Stock without par value, all classes of
preferred stock to have the rights and preferences set forth in this
Article; but said capital stock may be increased or decreased from time
to time, in accordance with the provisions of the laws of the State of
Michigan."
"Each sixty (60) shares of the corporation's Common Stock, $1.00 par
value per share, issued and outstanding as of the close of business on
the date this Certificate of Amendment is filed shall be converted into
one (1) share of the corporation's new Common Stock, $1.00 par value per
share, so that each share of the corporation's Common Stock issued and
outstanding is hereby converted and reclassified. No fractional
interests resulting from such conversion shall be issued, but in lieu
thereof, stockholders who ostensibly would be entitled to receive
fractional shares because they hold a number of shares not evenly
divisible by sixty (60) will be entitled, upon surrender to the Exchange
Agent of certificates representing such shares, to receive cash in the
amount of $10.00 for each of those shares fewer than sixty (60) held by
such stockholders that remain after dividing their total shares by
sixty."
Subsections (1) and (2) of Article III, Section 3.2(A)(g) of the
Corporation's Articles of Incorporation, regarding Class C Preferred Stock,
Series 1994-1, will be amended to provide as follows:
"(1) Sale; Right of First Refusal. If any holder of the Series 1994-1
Stock desires to sell the Series 1994-1 Stock it owns, it shall first
give written notice to the Corporation at least 90 days prior to the
proposed sale. The notice shall state the price, the terms, the numbers
of shares sought to be sold and the proposed purchaser. The Corporation
shall have the right at any time during such 90 day period to purchase
some or all of the shares proposed to be sold at a price equal to the
lower of the proposed purchase price per share or the redemption price
as determined from time to time pursuant to paragraph (f) above. If the
Corporation does not exercise its right to purchase such Series 1994-1
Stock, the selling holder may convert the Series 1994-1 Stock into
common Stock, based on the then applicable redemption price pursuant to
section (f) above (but no fractional shares shall be issued and they
shall be paid for in cash based on the applicable stock price), and sell
such Common Stock to the proposed purchaser at the agreed purchase
price. In such event, the purchaser shall be required to execute an
investment letter prepared by the Corporation or its counsel which
represents that the Common Stock is being acquired for investment and
not with a view to distribution thereof, and acknowledging that such
stock is ont registered under federal or state securities laws, is not
freely transferrable, and is subject to restrictions on transfer. The
certificates issued to the purchaser shall bear a legend to such
effect."
"(2) Sale; Conversion. In the event that the Corporation decides to make
a public offering of Common Stock pursuant to an effective registration
statement, it shall so notify the holders of the Series 1994-1 Stock and
if any such holder desires to sell any of the shares in connection with
such public offering, the holder shall deliver a written demand to the
Corporation within thirty (30) days of the date of the Corporation's
notice of the offering and shall cooperate with the Corporation in
connection with the registration of the offering. In such sale, each
share to be sold shall be converted automatically into 3.333 shares of
the Corporation's Common Stock (except no fractional shares shall be
issued and they shall be paid for in cash based on the applicable stock
price), which shall be
13
<PAGE> 17
registered for sale in the offering. The Series 1994-1 Stock (after
conversion into Common Stock) shall be sold to subscribers after the
first $600,000 of the Corporation's newly issued shares of Common stock
are sold. The Corporation shall bear the costs of the offering."
The first sentence of the second paragraph of Article III, Section 3.2
B(7) of the Corporation's Articles of Incorporation regarding the Class C
Preferred Stock, Series MI-1, will be amended to provide as follows:
"In the event that the holder attempts at any time to make a transfer of
some or all of the Series MI-1 Stock, upon transfer, ipso facto, and
without any other action by any party, the Series MI-1 Stock shall be
converted automatically into 2,272 shares of new non-voting Common Stock
("transferred stock") plus a right to receive an immediate cash payment
of $430."
The third paragraph of Article III, Section 3.2 B(7) of the Articles of
Incorporation will be amended to provide as follows:
"If the holder of the Series MI-1 Stock and the Corporation agree in
writing, the Series MI-1 Stock may be converted into a right to receive
an immediate cash payment of $430 plus 2,272 shares of voting Common
Stock as part of a public offering of the Corporation's securities in
which the holder of the Series MI-1 Stock shares pro rata in the costs
of such offering. The conversion shall not occur until the sale of the
Common Stock in the public offering."
VOTING ON THE REVERSE STOCK SPLIT
The holders of the Common Stock will vote on the proposed amendment to
the Articles of Incorporation to effect the Reverse Stock Split. A majority of
the outstanding shares of Common Stock is necessary to approve the Reverse Stock
Split proposal. The Board of Directors recommends a favorable vote on this
proposal for the reasons stated above at "Reasons for the Proposed Reverse Stock
Split." No other class of stock is required to vote on the proposed Reverse
Stock Split.
The Corporation's Board of Directors own 64.6% of its outstanding Common
Stock and intend to vote all of those shares in favor of the proposal. Thus,
their votes alone are sufficient to approve the proposal.
EXCHANGE OF STOCK CERTIFICATES
If the Reverse Stock Split is approved by the Company's stockholders,
the Company will instruct its transfer agent to act as its exchange agent (the
"Exchange Agent") and to act for holders of Common Stock in implementing the
exchange of their certificates.
Commencing on the effective date of the Reverse Stock Split (the
"Effective Date"), stockholders will be notified and requested to surrender to
the Exchange Agent their certificates representing shares of all Common Stock in
exchange for certificates representing new Common Stock. One share of New Common
Stock will be issued in exchange for each sixty (60) presently issued and
outstanding shares of Common Stock. Beginning on the Effective Date, each
certificate representing shares of the Company's Common Stock will be deemed,
for all corporate purposes, to evidence ownership of shares of new Common Stock.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is general and each shareholder's facts and
circumstances could affect the proper tax treatment of the transaction as it
relates to them. Shareholders should consult their own tax advisors for specific
tax advice for their own circumstances.
The Reverse Stock Split generally should not result in the recognition
of gain or loss (except in the case of
14
<PAGE> 18
cash payment received for fractional shares as described below). The holding
period of the shares of New Common Stock will include the stockholders' holding
periods for the shares of Common Stock exchanged therefore, provided that the
shares of Common Stock were held as a capital asset. The adjusted basis of the
shares of New Common Stock will be the same as the adjusted basis of the Common
Stock exchanged therefor, reduced by the basis applicable to the sale of
fractional shares described below.
A stockholder who receives cash for fractional shares will recognize a
gain or loss, as the case may be, measured by the difference between $10.00 for
each old share of Common Stock that was not converted into new shares of Common
Stock and the shareholder's basis for each share of his old Common Stock. The
gain or loss could be a capital gain or loss if such stockholder's Common Stock
was held as a capital asset and the capital gain or loss would generally be
long-term capital gain or loss to the extent the stockholder's holding period
for the Common Stock exceeds twelve months. Each stockholder is urged to consult
with his or her own tax advisor for tax advice appropriate to the stockholder's
own facts and circumstances.
NO DISSENTER'S RIGHTS
Under applicable Michigan law, stockholders are not entitled to
dissenter's rights of appraisal with respect to the Reverse Stock Split.
INDEPENDENT AUDITORS
The Board of Directors has selected Crowe, Chizek and Company, LLP, as
its independent auditors for 1999 as it did for 1998. A representative of that
firm is expected to be present at the meeting, will have the opportunity to make
a statement if he desires to do so, and will be available to respond to
appropriate questions.
PROPOSALS BY SHAREHOLDERS
Proposals by shareholders of the Corporation intended to be presented at
the next annual shareholders' meeting to be held in 2000 must be received by the
Corporation no later than January 31, 2000. Proposals must comply with
applicable laws and regulations and shall be delivered to 44 Michigan Avenue,
Detroit, Michigan 48226, Attention: Secretary. Any proposal which is mailed to
the Corporation should be mailed by certified or registered mail return receipt
requested.
INFORMATION INCORPORATED BY REFERENCE
The Corporation's Annual Report on Form 10-KSB accompanies this Proxy
Statement and is incorporated fully herein by reference. Shareholders are urged
to review the Form 10-KSB for financial information (pages 26-48) regarding the
Corporation and its wholly owned subsidiary, First Independence National Bank of
Detroit and the report of its independent accountants (page 25) as well as
Management's Discussion and Analysis (pages 7-20) of the Corporation's and
Bank's performance during 1998 and 1997 and its financial condition.
OTHER MATTERS
The Corporation's management knows of no other matters to be presented
for action at the meeting. It is the intention of the persons named in the
accompanying form of proxy to vote the shares represented thereby in accordance
with the directions of management on any matters properly brought before the
meeting which are not set forth in the Notice of the Meeting and in this Proxy
Statement.
15
<PAGE> 19
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and certain officers, and persons who own more than ten
percent of the Corporation's Common Stock to file with the SEC initial reports
of beneficial ownership and reports of changes in beneficial ownership of the
Corporation's equity securities. These officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the
Corporation with copies of these reports. To the Corporation's knowledge, based
solely on review of the copies of such reports furnished to the Corporation and
written representations that no other reports were required, all of Section
16(a) filing requirements applicable to its officers, directors, and greater
than ten-percent beneficial owners were complied with during the past two years.
SHAREHOLDERS ARE URGED TO DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
16
<PAGE> 20
FIRST INDEPENDENCE CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL SHAREHOLDERS' MEETING, THURSDAY, JULY 1, 1999
I, the undersigned shareholder of the First Independence Corporation,
hereby appoint Don Davis, Alan C. Young, and Dr. Charles E. Morton, and each of
them, my proxies, with power of substitution to vote all of the Common Stock of
said Corporation standing in my name on its books on April 30, 1999, at the
annual meeting of the shareholders to be held on Thursday, July 1, 1999 at 6:00
p.m. or at any and all adjournments thereof, on the proposals contained in the
Notice of said meeting, and on any other business properly coming before the
meeting. The proxyholders shall have all the powers I would possess if present
personally. I revoke all proxies previously given by me for any meeting of
shareholders of the Corporation.
If no direction is made with respect to a proposal, this proxy will be
voted FOR such proposal. In their discretion, the proxies are authorized to vote
on such other matters as may properly come before the meeting, including the
election of any person as Director where a nominee named in the Proxy Statement
dated May 28, 1999 is unable to serve or will not serve.
PLEASE VOTE, DATE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.
Note: Please sign exactly as name(s) appear(s) on stock records. When signing
as attorney, administrator, trustee, guardian or corporate officer, please so
indicate.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- -------------------------------------- ------------------------------
- -------------------------------------- ------------------------------
- -------------------------------------- ------------------------------
================================================================================
DETACH CARD
<PAGE> 21
<TABLE>
<CAPTION>
<S> <C> <C>
|_| PLEASE MARK VOTES AS IN THIS EXAMPLE
1. ELECTION OF DIRECTORS |_| FOR |_| WITHHOLD AUTHORITY |_| FOR ALL EXCEPT
BARRY CLAY, DON DAVIS, GEORGIS I. GARMO, DR. CHARLES E. MORTON, JAMAL SHALLAL,
GENEVA J. WILLIAMS, ALAN C. YOUNG.
To withhold authority to vote for any individual nominee, mark the "For All
Except" box and strike a line through the nominee's name in the list above.
2. AMENDING THE ARTICLES OF INCORPORATION TO EFFECT THE 1 FOR 60 SHARE REVERSE STOCK SPLIT.
|_| FOR |_| AGAINST |_| ABSTAIN
RECORD DATE SHARES: I (we) acknowledge receipt of the Notice of Annual Meeting and Proxy Statement dated May
28, 1999 and ratify all that the proxies or either of them or their substitutes may
lawfully do by virtue hereof and revoke
all former proxies.
UNLESS OTHERWISE SPECIFIED, THE PROXIES ARE APPOINTED TO VOTE FOR THE ELECTION OF ALL
DIRECTORS AND TO VOTE FOR AMENDING THE ARTICLES OF INCORPORATION OF THE CORPORATION TO
EFFECT THE ONE-FOR-SIXTY SHARE REVERSE STOCK SPLIT OF THE CORPORATION'S COMMON STOCK.
</TABLE>
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------
Shareholder sign here Co-owner sign here
