<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
First State Bancorp.
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
Notes:
<PAGE>
PRELIMINARY COPIES
FIRST STATE BANCORPORATION
111 LOMAS N.W.
ALBUQUERQUE, NEW MEXICO 87102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
___________________________________
May 2, 1997
TO THE SHAREHOLDERS OF FIRST STATE BANCORPORATION:
The annual meeting of shareholders of First State Bancorporation, a New
Mexico corporation, will be held on Friday, June 6, 1997, at 2:00 p.m. local
time in the Doubletree Hotel, 201 Marquette Avenue N.W. , Albuquerque, New
Mexico, for the following purposes:
1. To elect 3 directors to hold office for a term ending at the 2000
annual meeting or until their successors are duly elected and
qualified.
2. To approve an amendment to the Company's Restated Articles of
Incorporation to increase the number of authorized shares of the
Common Stock issuable by the Company from 4,000,000 to 20,000,000.
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
public accountants for the year ending December 31, 1997.
4. To transact any other business which properly comes before the
meeting or any adjournment.
All shareholders of record on the Company's transfer books as of the close
of business on May 2, 1997, are entitled to vote at the annual meeting. A
complete list of shareholders entitled to vote at the annual meeting will be
available for examination by any Company shareholder at 111 Lomas N.W.,
Albuquerque, New Mexico, for purposes germane to the annual meeting, during
normal business hours for a period of ten days prior to the annual meeting.
<PAGE>
Please read the attached proxy statement carefully. PLEASE SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD AUTHORIZING REPRESENTATIVES OF THE
COMPANY'S PRESENT MANAGEMENT TO VOTE ON YOUR BEHALF AT THE MEETING.
By the order of the Board
of Directors
FIRST STATE BANCORPORATION
Michael R. Stanford
President
<PAGE>
FIRST STATE BANCORPORATION
111 LOMAS N.W.
ALBUQUERQUE, NEW MEXICO 87102
May 2, 1997
PROXY STATEMENT
THIS PROXY STATEMENT AND ACCOMPANYING PROXY CARD SUPPORT A PROXY
SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST STATE BANCORPORATION
(THE "COMPANY") FOR USE AT THE JUNE 6, 1997 ANNUAL MEETING OF SHAREHOLDERS AND
AT ANY ADJOURNMENT OF THAT MEETING. This proxy statement and form of proxy will
be sent by mail to shareholders beginning approximately May 5, 1997.
The proxy card, when properly signed, dated and returned to the Company,
will be voted by the proxies at the annual meeting as directed. Proxy cards
returned without direction about business to be transacted at the meeting will
be voted in favor of (i) the nominees for director proposed by management, (ii)
approval of an amendment to the Company's Restated Articles of Incorporation to
increase the number of authorized shares of the Common Stock, no par value per
share (the "Common Stock"), issuable by the Company from 4,000,000 to
20,000,000, and (iii) ratification of the appointment of KPMG Peat Marwick LLP
as independent public accountants for the year ending December 31, 1997. The
holders of the proxies will use their best judgement regarding other matters
that properly come before the annual meeting. The Company is not aware of any
matters, other than those discussed in this proxy statement, that will be
presented at the annual meeting.
The Company can conduct business at the annual meeting only if holders of a
majority of the total outstanding shares of Common Stock entitled to vote are
present, either in person or by proxy. Assuming a quorum has been reached, the
affirmative vote of the majority of the shares represented is necessary to elect
directors and ratify the appointment of auditors. A majority of the total
outstanding shares of Common Stock is necessary to approve the proposed
amendment to the Company's Restated Articles of Incorporation.
Under the rules of the Securities and Exchange Commission, boxes and a
designated blank space are provided on the proxy card for shareholders to mark
if they wish either to vote "for", "against" or " abstain" on one or more of the
proposals, or to withhold authority to vote for one or more of the Company's
nominees for director.
Votes withheld from director nominees and abstentions will be counted in
determining whether a quorum has been reached. Broker-dealer non-votes will
also be counted for quorum purposes.
1
<PAGE>
REVOCABILITY OF PROXY
Any shareholder giving a proxy may revoke it at any time prior to the
meeting either through submission of a later-dated proxy or by providing notice
of revocation to the Secretary of the Company at the address set forth above.
Shareholders may vote all their eligible shares if they are personally present
at the meeting. When a shareholder votes at the meeting, his or her vote will
revoke any proxy previously granted by the shareholder.
EXPENSE AND MANNER OF SOLICITATION
In addition to solicitation by mail, proxies may be solicited in person or
by telephone or telegram by directors and officers of the Company who will not
receive compensation for their soliciting activities. Brokers and other
nominees will solicit proxies or authorizations from beneficial owners and will
be reimbursed for their reasonable expenses. The Company has retained Corporate
Investor Communications, Inc., to assist in soliciting proxies from brokers,
bank nominees and other institutional holders for a fee estimated at $5,000;
plus expenses. The Company will bear all of the costs of the solicitation.
PROPOSAL 1
ELECTION OF DIRECTORS
All of the Common Stock represented by valid proxies received from
shareholders will be voted for the nominees for directors named below, unless
authority to do so is withheld. Each nominee for director has agreed to his
nomination and to serve if elected. If any nominee is unable to serve, the
proxy will be voted to elect any other person for the office of director whom
the Board of Directors recommends in the place of that nominee.
Three directors are to be elected to serve until the 2000 Annual Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS
As of May 2, 1997, the record date, _________ shares of the Common Stock
were outstanding and entitled to vote at the annual meeting. Holders of shares
of Common Stock may cast one vote for each share on each matter of business
properly brought before the meeting. Only shareholders of record at the close
of business on May 2, 1997 may vote. Shareholders are not allowed to cumulate
votes in the election of directors.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 26, 1997, by (i) each
shareholder known by the Company to be the beneficial owner of more than 5
percent of the outstanding Common
2
<PAGE>
Stock, (ii) each director of the Company, (iii) the non incumbent nominee for
director, and (iv) all directors, nominees and executive officers as a group.
Unless otherwise indicated, based on information furnished by such owners, the
Company believes that the shareholders listed below have sole investment and
voting power with respect to their shares. The address of each of the persons is
the Company's address, 111 Lomas Avenue N.W., Albuquerque, New Mexico 87102.
<TABLE>
<CAPTION>
Number of Shares Percentage of
Name Owned (1) Shares Owned
- ------------------------------------------------------------------------------
<S> <C> <C>
Richard Duchossois 112,500 5.12%
845 Larch Avenue
Elmhurst, IL 60126
John Hancock Advisors, Inc. 170,125 7.74%
101 Hummington Ave.
Boston, MA 02199
Michael R. Stanford 112,772 (2) 4.95%
H. Patrick Dee 42,855 (3) 1.92%
Eloy A. Jeantete 1,000 *
Leonard J. DeLayo, Jr. 98,089 (4) 4.41%
Bradford M. Johnson 164,009 7.43%
Sherman McCorkle 1,051 *
Douglas M. Smith, M.D. 23,750 1.08%
Herman N. Wisenteiner 9,454 *
Marshall G. Martin 300 *
Manuel Lujan Jr. 10,625 *
all executive officers and
directors as a group (13 persons) 503,318 21.17%
- ------------------------------------------------------------------------------
* Less than 1%
</TABLE>
(1) Includes shares of Common Stock issuable on conversion of 7% Convertible
Subordinated Debentures.
(2) Includes 28,613 shares that are subject to an option held by Mr. Stanford
which is exercisable at $5.01 per share and 50,000 that are subject to an
option held by Mr. Stanford which is exercisable at $8.40 per share.
(3) Includes 35,000 shares that are subject to an option held by Mr. Dee which
is exercisable at $8.40 per share.
(4) Includes 10,000 shares that are subject to an option held by Mr. DeLayo
which is exercisable at $8.40 per share.
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
Certain biographical information, including principal occupation and
business experience during the last five years, of each nominee for director is
set forth below. Unless otherwise stated, the principal occupation of each
nominee has been the same for the past five years.
<TABLE>
<CAPTION>
Name Age Position with Company
- --------------------------------------------------------------------------------
<S> <C> <C>
Eloy A. Jeantete 69 Chairman of Board and Director
Michael R. Stanford 44 President, Chief Executive Officer and Director
Marshall Martin 58 Nominee for Director
- --------------------------------------------------------------------------------
</TABLE>
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS VOTE FOR THE NOMINEES
---
FOR THE BOARD OF DIRECTORS.
There are no family relationships among any of the directors, officers or
key employees of the Company. The current authorized number of directors of the
Company is ten. The directors nominated herein will serve until the 2000 annual
meeting.
NOMINEES FOR ELECTION AT 1997 ANNUAL MEETING
Michael R. Stanford, a Director of the Company since its organization in
1988, is President and Chief Executive Officer of the Company and The Bank of
Taos, a wholly-owned subsidiary of the Company (the "Bank"). Mr. Stanford's
entire career has been in the banking industry. Prior to joining the Bank in
1987, Mr. Stanford spent five years with New Mexico Banquest Corporation as
Senior Vice President in charge of loan administration. Mr. Stanford is a past
director of the New Mexico Bankers Association. In addition, Mr. Stanford is
involved in a variety of civic organizations.
Eloy A. Jeantete, a Director of the Company since August 1993 and Chairman
of the Board since January 1994, joined the Bank as a bookkeeper and has spent
his entire working career with the Bank rising to his present position of
Chairman of the Board of the Company. As a lifetime resident of Taos, NM, Mr.
Jeantete has accumulated a long list of civic achievements and community
involvement, culminating with his election in 1990 as Mayor of Taos, NM, a
position he held until March 1994.
4
<PAGE>
Marshall Martin is Vice President-General Counsel of Solv-Ex Corporation.
Prior to joining Solv-Ex in January of 1997, Mr. Martin was a senior partner in
the law firm of Hinkle, Eaton, Cox, Coffield & Hensley L.L.P.. Hinkle, Eaton,
Cox, Coffield & Hensley is the Company's corporate counsel. See--Certain
Business Relationships--Legal Services. Mr. Martin is involved in a variety of
civic organizations.
Certain biographical information, including principal occupation and
business during the last five years of the current directors serving until the
1998 and 1999 Annual Meetings is set forth below. Unless otherwise stated, the
principal occupation of each director has been the same for the past five years.
CURRENT DIRECTORS SERVING UNTIL 1998 ANNUAL MEETING
<TABLE>
<CAPTION>
Name Age Position with Company
- --------------------------------------------------------------------------------
<S> <C> <C>
H. Patrick Dee 42 Executive Vice President, Chief
Operating Officer, Secretary, Treasurer
and Director
Leonard J. DeLayo, Jr. 48 Director
Bradford M. Johnson 46 Director
- --------------------------------------------------------------------------------
</TABLE>
H. Patrick Dee has been a Director of the Company since 1991 and presently
serves as Executive Vice President, Chief Operating Officer and
Secretary/Treasurer of the Company, and Executive Vice President and Chief
Operating Officer of the Bank, a position he has held since December 1991.
Prior to joining the Company, Mr. Dee spent four years with New Mexico Banquest
Corporation and, after its acquisition by Livingston & Co. Southwest L.P. in
1988, National Bank of Albuquerque. In 1989, Mr. Dee became Senior Vice
President and Chief Financial Officer of Livingston & Co. Southwest, L.P. Mr.
Dee is a certified public accountant.
Leonard J. DeLayo, Jr., a Director of the Company since November 1993,
served as a director of the Bank from 1988 to January 1992. Mr. DeLayo has been
engaged in a general corporate and commercial law practice in New Mexico since
1974 and is the President and sole shareholder of Leonard J. DeLayo, Jr., P.C.,
which currently provides legal services to the Company and the Bank as outside
counsel. Mr. DeLayo is a member of the Albuquerque Board of Education.
5
<PAGE>
Bradford M. Johnson, a Director of the Company since November 1993, is
President of Heron Hill Corporation, a private company engaged in investments
and financial consulting. From 1991 to November 1993 Mr. Johnson was a partner
and Director of Research of Sterne, Agee & Leach, Inc., an investment banking
firm in Atlanta, Georgia. Mr. Johnson studied at the University de Paris-
Sorbonne from 1987 to 1991. Mr. Johnson is a director of Community Bank
Capital Corporation, a privately owned thrift holding company in Atlanta,
Georgia.
CURRENT DIRECTORS SERVING UNTIL THE 1999 ANNUAL MEETING
<TABLE>
<CAPTION>
Name Age Position with Company
- -----------------------------------------------------------------------------
<S> <C> <C>
Sherman McCorkle 53 Director
Douglas M. Smith, M.D. 63 Director
Herman N. Wisenteiner 66 Director
Manuel Lujan, Jr. 68 Director
- -----------------------------------------------------------------------------
</TABLE>
Sherman McCorkle, a Director of the Company since November l993, is the
President of Technology Ventures Corporation, a wholly-owned subsidiary of
Martin Marietta Corporation, and has over fifteen years of banking experience.
Mr. McCorkle served as President and Chief Executive Officer of Sunwest Credit
Services Corporation from December 1988 to April 1992. Prior to that time, Mr.
McCorkle held a variety of positions with Sunwest Credit Services Corporation's
parent, Sunwest Bank of Albuquerque, N.A.. Mr. McCorkle was a past Chairman of
the Greater Albuquerque Chamber of Commerce, a Board member of United Way and a
member of the American Bankers Association.
Douglas M. Smith, M.D., a Director of the Company since November 1993, is a
Board Certified radiologist and the owner/general partner of The Historic Taos
Inn, Taos, New Mexico. Dr. Smith is the co-founder and former President of Palm
Beach Imaging, Inc., West Palm Beach, Florida and a former member of the Board
of Directors of the PIE Medical Insurance Co., a physician-owned medical
malpractice insurance company headquartered in Cleveland, Ohio.
Herman N. Wisenteiner, a Director of the Company since November 1993, is
President and Chief Executive Officer of Horn Distributing Company, a real
estate holding company which he founded in 1971 in Santa Fe, New Mexico. In
addition to his many civic activities in northern New Mexico, from 1984 to 1993
Mr. Wisenteiner was also Chairman and Chief Executive Officer of CLX Exploration
Inc., a publicly traded oil and natural gas
6
<PAGE>
exploration and production company headquartered in Denver, Colorado and served
as a Director of First Interstate Bank, Santa Fe, New Mexico from 1980 to 1993.
Manuel Lujan Jr., a Director of the Company since June 1995, is a self
employed consultant on federal legislative matters. Mr. Lujan is also a self
employed real estate agent and an insurance agent for the Manuel Lujan Insurance
Agency. Mr. Lujan served as Secretary of the Interior during the Bush
administration until January 1993. Prior to serving as Secretary of the
Interior, Mr. Lujan was a member of the United States House of Representatives
representing New Mexico.
INFORMATION WITH RESPECT TO STANDING COMMITTEES OF THE
BOARD OF DIRECTORS AND MEETINGS
The Board of Directors held five meetings during the year ended December
31, 1996. Each incumbent director attended 75% or more of the meetings of the
board of directors and committees on which he served.
The Board of Directors has an executive committee, an audit committee and a
compensation committee.
The executive committee members are Michael R. Stanford, Bradford M.
Johnson, Sherman McCorkle and Douglas M. Smith. The executive committee held two
meetings during 1996. The executive committee meets periodically to explore and
consider issues in advance of the meetings of the entire Board of Directors and
makes recommendations to the Board of Directors concerning such issues.
The audit committee members are Douglas M. Smith, Sherman McCorkle and
Bradford M. Johnson. The audit committee held four quarterly meetings during the
year ended December 31, 1996. The audit committee reviews with the independent
and internal auditors of the Company their respective audit and review programs,
procedures, the scope and results of their examinations, and their fee and
related costs. Additionally, the audit committee reviews the financial
statements and the adequacy of the Company's system of internal accounting
controls. The audit committee makes recommendations to the Board of Directors
relating to the independent auditors and to their engagement or discharge.
The compensation committee members are Leonard J. DeLayo, Jr. and Herman N.
Wisenteiner. The committee held two meetings during the year ended December
31,1996. The purpose of the compensation committee is to determine the
compensation and benefits for executive officers of the Company.
7
<PAGE>
CERTAIN BUSINESS RELATIONSHIPS
CREDIT TRANSACTIONS
The executive officers, directors and principal shareholders of the
Company and the Bank, and members of their immediate families and businesses in
which these individuals hold controlling interests, are customers of the Bank
and it is anticipated that such parties will continue to be customers of the
Bank in the future. Credit transactions with these parties are subject to
review by the Bank's Board of Directors. All outstanding loans and extensions
of credit by the Bank to these parties were made in the ordinary course of
business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and in the opinion of management did not involve more than the
normal risk of collectibility or present other unfavorable features.
At December 31, 1996, the aggregate balance of the Bank's loans and
advances under existing lines of credit to these parties was approximately $1.9
million, or 0.78% of the Bank's total loans. All payments of principal and
interest on these loans are current. These loans represented 9.24% of the
Company's equity as of December 31, 1996.
LEGAL SERVICES
Mr. DeLayo was a director of the Bank from 1988 through January 1992, and
was appointed as a director of the Company in November 1993. Mr. DeLayo acts as
general counsel to the Company and the Bank. Mr. DeLayo and his firm, Leonard
J. DeLayo, P.C., are involved in representing the Company in numerous collection
matters. The Company paid Mr. DeLayo's firm approximately $146,000 for its
services in 1996.
Marshall Martin, a nominee for director, was a Senior Partner with Hinkle,
Eaton, Cox Coffield & Hensley L.L.P., the Company's corporate counsel until
January of 1997. The Company paid Hinkle, Eaton, Cox, Coffield & Hensley L.L.P.
$64,700 in fees for its services in 1996.
SANTA FE BRANCH LOCATION
The downtown Santa Fe location was constructed on land owned by Herman
Wisenteiner, a Director of the Company. The Company is leasing the site from
Mr. Wisenteiner for an initial term of 15 years at an initial rate of $60,000
per year. In the opinion of management, the lease is on terms similar to other
third party commercial transactions in the ordinary course of business.
8
<PAGE>
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is paid an annual fee
of $3,000 and a per meeting fee of $500 and is reimbursed for expenses incurred
in attending meetings of the Board of Directors and the committee meetings of
the Board of Directors.
EXECUTIVE COMPENSATION
The following tables set forth the compensation paid by the Company in
1996, 1995, and 1994 to the two executive officers of the Company and one
officer of The Bank who received in excess of $100,000 in cash compensation.
<TABLE>
<CAPTION>
Annual Compensation
- ---------------------------------------------------------------------------------------------------
Long-Term
Compensation
Other Annual Stock
Name and Principal Compensation Options
Position Year Salary ($) Bonus ($) ($) (1) Granted (#)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Michael R. Stanford 1996 $183,333 $24,000 $41,621 0
President and Chief 1995 $175,000 $45,000 $42,636 0
Executive Officer 1994 $166,250 $37,500 $44,483 0
H. Patrick Dee 1996 $130,000 $16,000 $42,836 0
Secretary and 1995 $116,250 $30,000 $39,369 0
Treasurer 1994 $ 92,083 $22,500 $36,580 0
W. Gary Millhollon (2) 1996 $ 86,575 $20,830 $ 6,000 0
Senior Vice President
First State Bank
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents insurance premiums paid by the Company on behalf of the
employee, amounts contributed by the Company to the employee's Section
401(k) plan, auto allowance and dues.
(2) Mr. Millhollon was hired by the Bank effective December 1995.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Shares Underlying In-the-Money
Acquired Unexercised Options Options at
on Value at 12/31/96 (#) 12/31/96 ($) (1)
Name Exercise Realized Exercisable/ Exercisable/
(#) ($) Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael R. Stanford 19,600 $124,754 100,113(2)(3) $830,629
12,000 $ 82,500
H. Patrick Dee - - 35,000 $231,000
8,750 $ 57,750
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) The closing price of the Company's Common Stock on December 31, 1996 was
$15.00 per share.
(2) On January 30, 1997, Mr. Stanford exercised options to acquire 21,500
shares of Common Stock at an exercise price of $5.01 per share.
(3) Includes the option to purchase 28,613 shares of Common Stock described
under "Stock Option Agreement" below.
EXECUTIVE INSURANCE
The Bank has key-person insurance policies on each of Messrs. Stanford and
Dee. Under these policies, the Bank is named as beneficiary of $810,000 of term
life insurance on Mr. Stanford and $533,000 of term life insurance on Mr. Dee
(the "Term Life Policies"). In addition, the Bank also pays the premiums on
$690,000 of additional whole life insurance for Mr. Stanford and $667,000 for
Mr. Dee under which each of these individuals is able to name the beneficiary
(the "Whole Life Policies"). Under the provisions of the Term Life Policies the
amount of term insurance under each policy is gradually decreased over a period
of 10 years. However, the Bank's premium payments are kept level during the
entire 10 year period with the excess premiums from the Term Life Policies being
applied to the Whole Life Policies. As a result of the increasing portion of the
premiums which are allocated to the Whole Life Policies, at the end of the 10
year period the Whole Life Policies are fully paid. Upon termination of
employment, the Whole Life Policies would be transferable to Messrs. Stanford or
Dee, as the case may be, who could elect to continue making the premium payment
if such termination occurred prior to the tenth year of the policy. The annual
premium which will be paid for the Whole Life Policies will constitute
compensation to such individuals.
10
<PAGE>
STOCK OPTION AGREEMENT
Under the terms of a stock option agreement, Michael R. Stanford can
exercise an option to purchase 28,613 shares of Common Stock at a price of $5.01
per share. As originally granted, the option allowed Mr. Stanford to purchase up
to 10% of the common stock of New Mexico Bank Corporation ("NMBC"), the parent
holding company of NBA, at the book value of the NMBC common stock as of
November 19, 1990. In December 1991, the option was converted to an option to
purchase the Company's Common Stock when NMBC was merged into the Company. The
option may be exercised at any time by Mr. Stanford and will expire on October
12, 2003.
EXECUTIVE INCOME PROTECTION PLAN
The Company has an Executive Income Protection Plan (the "Plan") with the
following participants: Patrick G. Cahalan, Robert L. Chavez, H. Patrick Dee,
Brian C. Reinhardt, and Michael R. Stanford, which provides for benefits upon a
Control Change. Following a Control Change (as defined in the Plan), the Plan
provides for a three-year employment term and specifies the employee's position,
salary, bonus, and benefits payable during that period. If the employee (i)
resigns; (ii) is discharged for any reason other than cause, death, or
disability; (iii) experiences a Reduction in Position (as defined in the Plan)
within a three-year period beginning on the date of the Control Change, then the
employee shall have income protection benefits consisting of (a) a compensation
benefit, payable in a single sum, equal to three times his Compensation (as
defined in the Plan) in the case of Messrs. Dee and Stanford and two times his
Compensation in the case of Messrs. Cahalan, Chavez, and Reinhardt; (b) the same
level of fringe benefits as existed on the date of the Control Change for a
period ending three years after the Control Change including, without
limitation, any plan or arrangement to receive and exercise stock options and/or
stock appreciation rights, restricted stock, or grants thereof in which the
employee is participating on the date of the Control Change (or plans or
arrangements providing him with substantially similar benefits); (C) an amount
equal to the employee's non-vested accrued benefit in the Company's retirement
plans, determined as of the last valuation date under such plans, if the
employee is not fully vested under the terms of such plans; (d) up to a maximum
of 30 percent of his Compensation for out-placement services for the employee;
and (e) a lump sum payment at the same time as the compensation payment in (a)
above, if the Company has purchased a split-dollar life insurance policy on the
life of an employee.
"Control Change" is defined in the Plan as (i) a sale or sales (including
an exchange) of shares of the Company, other than pursuant to a public offering,
at one or more times by the Company, a shareholder or shareholders of the
Company, or by any combination of the foregoing, which in the aggregate results
in the beneficial ownership of more than 50 percent of the combined voting power
of the Company's outstanding securities after the sale or sales by one or more
shareholders who are not shareholders of the Company on April 19, 1996 (the
effective date of the Plan), and who are not controlled after the sale or sales,
directly or indirectly, by one or more of the shareholders of the Company on
April 19, 1996; (ii) a sale
11
<PAGE>
or sales by the Company of all or substantially all of its assets to one or more
persons or entities who are not shareholders of the Company on April 19, 1996,
and who are not controlled after the sale or sales, directly or indirectly, by
one or more of such shareholders; or (iii) a merger or other combination in
which the Company is either the surviving or disappearing corporation, which
results in the beneficial ownership of more than 50 percent of the combined
voting power of the outstanding securities of the surviving corporation by one
or more persons or entities which are not shareholders of the Company on April
19, 1996, and which are not controlled after such merger or other combination,
directly or indirectly, by one or more of such shareholders; (iv) the approval
by the shareholders of the Company of any plan or proposal to liquidate or
dissolve the Company; or (v) during any period of two consecutive years,
individuals who at the beginning of the period constitute the entire Board of
Directors of the Company cease for any reason to constitute a majority thereof,
unless the election or the nomination for election by the Company's shareholders
of each new director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the
period.
"Compensation" means the sum of; (i) the employee's average taxable
compensation from the Company; (ii) the employee's average elective salary
reduction contributions to plans under Internal Revenue Code (the "Code")
Sections 401(k) and/or 125; and (iii) the product of the average percent of
covered payroll contributed by the Company to the Company's 401(k) profit
sharing plan multiplied by the sum of (i) and (ii), all for the five calendar
years preceding the Control Change.
"Reduction in Position" shall occur if an employee (i) is removed as an
officer or director; (ii) experiences significant decrease in managerial or
supervisory authority; (iii) experiences a reduction in salary or bonus; (iv) is
required by the Company to relocate to an office more than 50 miles from his
location before the Control Change; (v) is reduced in the rate of his awards
under any stock option plan in effect before the Control Change; (vi)
experiences a material adverse change in his terms and conditions of employment.
The Plan provides that the employees will be entitled to a gross-up payment
if it is determined that any payment would be subject to excise tax imposed by
Section 4999 of the Code. The Plan also provides for the Company to pay the
employee's legal fees incurred in any contest relating to the Plan and certain
other indemnifications to the extent permitted under applicable New Mexico or
federal law and under the Company's Bylaws and Articles of Incorporation.
The aggregate cost to the Company of the requirements for payments to
employees covered under the Plan (including the cost of early vesting under
employee plans) would not exceed $2.4 million.
12
<PAGE>
SECTION 401(K) PLAN
In 1991, the Bank adopted a tax-qualified profit sharing 401(k) plan (the
"Saving Plan") covering all employees who have attained 21 years of age and have
completed one year of service with the Bank. Each participant in the Saving Plan
may reduce his or her salary by as much as the lesser of 20% of his or her
compensation or, in 1996, $9,500. The dollar limit is adjusted each year for
inflation. The Bank is required to make matching contributions of up to 50% of
the first 6% of a participant's deferred compensation up to a maximum of 3%. The
Bank may, but is not required to, contribute additional amounts to the Saving
Plan. Any such additional amounts are allocated to the accounts of participants
who were active participants on the last day of the plan year or who retired or
died or were disabled during the plan year. The allocation is in proportion to
the eligible participants' compensation. During 1996, 1995 and 1994, the Bank
made contributions to the Saving Plan of $106,000, $70,000 and $53,000,
respectively.
All contributions by a participant are 100% vested and nonforfeitable at
all times. The Bank's contributions become 100% vested after three years of
service with the Bank. A participant may direct the investment of his or her
account pursuant to the investment options offered by the trustee of the Saving
Plan. Distribution of a participant's account under the Saving Plan normally
occurs upon the participant's retirement or the participant's termination of
employment with the Bank.
INCENTIVE PLANS
The Company has adopted a Stock Option Plan (the "Stock Option Plan").
Under the Stock Option Plan, the Company has reserved an aggregate of 225,000
shares of Common Stock for issuance pursuant to the exercise of options. Options
may be granted to key employees of the Company, including directors who are also
employees of the Company, and to certain outside consultants. As of March 26,
1997, options to purchase 199,753 shares of Common Stock were outstanding under
the Stock Option Plan.
The Stock Option Plan is to be administered by a committee which is
composed of disinterested members of the Board of Directors (the "Committee").
Subject to the terms of the Stock Option Plan, the Committee determines the
persons to whom awards are granted, the type of award granted, the number of
shares granted, the vesting schedule, the type of consideration to be paid to
the Company upon exercise of options and the term of each option (not to exceed
ten years).
Under the Stock Option Plan, the Company may grant both incentive stock
options ("incentive stock options") intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and options which are
not qualified as incentive
13
<PAGE>
stock options ("nonqualified stock options"). Incentive stock options must be
granted at an exercise price equal to or greater than the fair market value of
the Common Stock on the date of grant. The exercise price of nonqualified stock
options granted under the Stock Option Plan will be determined by the Committee
on the date of grant. The exercise price of incentive stock options granted to
holders of more than 10% of the Common Stock must be at least 110% of the fair
market value of the Common Stock on the date of grant, and the term of these
options may not exceed five years.
The Stock Option Plan provides that the total number of shares covered by
such plan, the number of shares covered by each option and the exercise price
per share may be proportionately adjusted by the Board of Directors or the
Committee in the event of a stock split, reverse stock split, stock dividend or
similar capital adjustment effected without receipt of consideration by the
Company.
Upon a change in control of the Company, stock options outstanding under
the Stock Option Plan immediately become fully vested and exercisable. Also, in
the event of a merger or consolidation in which the Company is not the surviving
corporation, the sale of all or substantially all of the Company's assets,
certain reorganizations or the liquidation of the Company, each option granted
under the Stock Option Plan may, at the election of the holder, become
immediately exercisable.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities and certain other affiliated persons to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. Officers,
directors and greater than 10% shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that no other forms were required, the
Company believes that during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with, except that Michael R.
Stanford, President, Chief Executive Officer and Director, failed to timely file
a report of an exercise of stock options. The report has now been filed.
14
<PAGE>
PROPOSAL 2
INCREASE IN AUTHORIZED COMMON STOCK
AMENDMENT TO RESTATE ARTICLES OF INCORPORATION
This proposal is to approve an Amendment to the Restated Articles of
Incorporation to increase the number of authorized shares of the Common Stock
from 4,000,000 to 20,000,000. As of March 26, 1997, the Company had 3,697,774
shares of the Common Stock issued and outstanding or available for issuance
pursuant to an option held by an officer of the Company, the First State
Bancorporation 1993 Stock Option Plan, the Dividend Reinvestment and Cash
Payment Plan, warrants issued to an underwriter of the Company's initial public
offering, shares issuable upon conversion of the Company's 7% Convertible
Exchangeable Redeemable Subordinated Debentures due 2003 (called for redemption
as of April 30, 1997) and shares issuable upon conversion of the proposed
Convertible Subordinated Debentures for which a registration statement was filed
April 2, 1997, if such Debentures are issued. The increase will permit the
Company to issue additional Common Stock if the Board of Directors determines
that the issuance is in the best interests of the Company. Although the Board
of Directors has no current intention to issue any additional Common Stock
(other than as permitted by the items referred to in this proposal), future
growth of the Company may require additional issuances of the Common Stock to
finance, for example, additional growth and possible acquisitions. The
additional Common Stock which would be authorized by this Amendment would, as is
the existing authorized but unissued Common Stock, be available for issuance
without further action by the shareholders, unless such action is required by
applicable law or the rules of the NASD or any stock exchange on which the
Common Stock may be listed. The management of the Company believes that the
flexibility to issue additional Common Stock will enable the Company's ability
to take advantage of future business opportunities and thereby enhance the long-
term growth of the company. The full text of the Amendment is set forth as
follows:
ARTICLE FOUR
Section 4.1 Authorized Shares. The total number of shares that the
------------------
corporation shall have authority to issue is twenty-one million (21,000,000)
shares, of which twenty million (20,000,000) shares shall be common stock, no
par value, and one million (1,000,000) shares shall be preferred shares as
determined pursuant to Section 4.3 hereof.
15
<PAGE>
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
The Company has a Shareholder Protection Rights Agreement (the "Rights
Agreement") designed to ensure that all shareholders receive fair and equal
treatment in the event of any proposal to acquire control of the Company. Under
the Rights Agreement, a right to purchase additional shares of the Company's
stock is attached automatically to each share of Common Stock outstanding on, or
issued after October 25, 1996.
The key feature of the Rights Agreement is that it permits, upon the
occurrence of certain hostile acquisition events, all holders of Common Stock,
other than the hostile acquiror, to purchase Common Stock or, in certain cases,
the common stock of the hostile acquiror, at 50 percent of the then-current
market price, thus causing substantial dilution of the hostile acquiror's
holdings and greatly increasing the cost of the acquisition.
The Rights Agreement provides that if a hostile acquiror acquires 10
percent or more of the Common Stock (a "flip-in" event), all rights, other than
the rights held by the hostile acquiror, will become exercisable for a number of
shares of Common Stock having an aggregate market value equal to twice the
exercise price for the rights.
In addition, the Rights Agreement provides that, upon the consummation of
certain business combinations between a hostile acquiror and the Company in
which the acquiror is the surviving corporation (a "flip-over" event), all
rights, other than the rights held by the acquiror, will become exercisable for
a number of shares of common stock of the acquiror having an aggregate market
value equal to twice the exercise price for the rights.
The Rights Agreement also provides that once a person becomes an acquiring
person, the Board of Directors may exchange each right, other than the rights
held by the acquiror, for one share of Common Stock, thus allowing the Board of
Directors to cause the desired dilution without relying on the shareholders to
exercise the rights.
The Company will be entitled to redeem the rights for $0.01 per right until
the tenth day following a public announcement of the acquisition of ten percent
of its common shares. The rights expire on October 25, 2006, unless earlier
redeemed or exchanged by the Company, and have no effect on operating results or
earnings per share.
In connection with consideration of this proposed Amendment, reference is
also made to the Company's consolidated financial statements, the Company's
quarterly operating results, and Management's Discussion and Analysis appearing
in the 1996 Annual Report to the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSED
---
AMENDMENT.
16
<PAGE>
PROPOSAL 3
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP was the Company's independent public accounting firm
for 1996 and has been approved by the Directors to continue in that capacity in
1997.
A proposal to ratify the appointment of KPMG Peat Marwick LLP will be
presented to the shareholders at the annual meeting. Representatives of KPMG
Peat Marwick LLP will be present at the annual meeting and will have an
opportunity to make a statement if they desire to do so and respond to
appropriate questions.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE
---
APPOINTMENT OF KPMG PEAT MARWICK LLP
17
<PAGE>
SHAREHOLDER PROPOSALS
Shareholders are entitled to submit proposals on matters appropriate for
shareholder action consistent with regulations of the Securities and Exchange
Commission and the Company's bylaws. Should a shareholder wish to have a
proposal appear in the Company's proxy statement for next year's annual meeting,
under the regulations of the Securities and Exchange Commission it must be
received by the Secretary of the Company (at P.O. Box 3686, Albuquerque, New
Mexico) on or before December 15, 1997.
OTHER BUSINESS
All items of business to be brought before the meeting are set forth
in this proxy statement. Management knows of no other business to be presented.
If other matters of business not presently known to management are properly
raised at the meeting, the proxies will vote on the matters in accordance with
their best judgment.
By order of the Board of Directors
FIRST STATE BANCORPORATION
_____________________________
Michael R. Stanford
President
NOTE:
Shareholders are requested to sign, date and promptly return the enclosed
proxy card, using the enclosed envelope.
18
<PAGE>
PRELIMINARY COPIES
FIRST STATE BANCORPORATION
111 LOMAS N.W.
ALBUQUERQUE, NEW MEXICO 87102
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints H. Patrick Dee and Michael R. Stanford as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of First State Bancorporation held of record by the undersigned on May 2,
1997, at the annual meeting of shareholders to be held on June 6, 1997 or any
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1 AND "FOR"
ITEMS 2 AND 3.
Item 1- ELECTION OF DIRECTORS
[_] FOR all nominees [_] WITHHOLD AUTHORITY for all nominees
INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name in the list below.
Eloy A. Jeantete, Marshall G. Martin, Michael R. Stanford
Item 2- PROPOSAL TO APPROVE AN AMENDMENT TO THE RESTATED ARTICLES OF
INCORPORATION to increase the number of authorized common shares from
4,000,000 to 20,000,000.
[_] For [_] Against [_] Abstain
Item 3- PROPOSAL TO RATIFY THE SELECTION OF KPMG Peat Marwick as the independent
public accountants of the Company.
[_] For [_] Against [_] Abstain
Item 4-In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder.
The shares represented by this proxy will be voted as directed by the
shareholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR all nominees" in Item 1 and "FOR" Item 2 and 3.
PLEASE DATE AND SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
-------------
Please mark, sign, date and return the proxy
card promptly, using the enclosed envelope.
Date________________________________________
Signature___________________________________
Signature
if held jointly____________________________
Please sign exactly as name appears. When
shares are held by joint tenants, both
should sign. When signing as attorney, as
executor, administrator, trustee or
guardian, please give full title as such. If
a corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
