FIRST MUTUAL BANCSHARES INC DEF 14A 2006
Proxy Statement Pursuant To
Section 14(a) of
Filed by the
Check the appropriate box:
First Mutual Bancshares, Inc.
(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):
ANNUAL MEETING OF SHAREHOLDERS
April 27, 2006
This Proxy Statement and the accompanying Proxy are being sent to shareholders of First Mutual Bancshares, Inc. (Shareholders) on or about March 17, 2006, for use in connection with the Annual Meeting of Shareholders (Annual Meeting or Meeting) of First Mutual Bancshares, Inc. (the Company) to be held on Thursday, April 27, 2006.
Who is entitled to vote at the meeting?
If you were a shareholder of record at the close of business on February 27, 2006 (Date of Record) you are entitled to vote. The number of shares of the Companys $1.00 par value common stock (Common Stock) outstanding on the Date of Record and entitled to vote at the Annual Meeting is 5,302,107.
What is the difference between a Shareholder of Record and a Street Name holder?
If you are a registered shareholder (if your shares are registered directly in your name), you are considered a shareholder of record with respect to those shares.
If your shares are held in a brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the shareholder of record with respect to those shares. However, you are still considered the beneficial owner of those shares and your shares are said to be held in street name. If you hold your shares in street name, you will receive instructions from your broker or other nominee that you must follow in order to vote your shares. If you wish to change your voting instructions after you have returned your voting instructions form to your broker or other nominee, you must contact your broker or other nominee. If you want to vote shares held in street name at the Annual Meeting, you will need to contact your broker, bank or other nominee to obtain a legal proxy to permit you to vote at the Meeting.
How many votes are required?
The presence, in person or by proxy, of at least a majority of the total number of outstanding shares of Common Stock entitled to vote will constitute a quorum at the Annual Meeting. Abstentions will be counted as shares present and entitled to vote at the Annual Meeting for purposes of determining the presence of a quorum. Broker non-votes will not be considered shares present and will not be included in determining whether a quorum is present.
CLASS III DIRECTORS
The term of the Class III directors listed below will expire in 2007. Election for Class III directors will be held at the 2007 Annual Meeting of Shareholders.
CLASS I DIRECTORS
The term of the Class I directors listed below will expire in 2008. Election for Class I directors will be held at the 2008 Annual Meeting of Shareholders.
* Member of the Nominations and Corporate Governance Committee
The Audit-Related Fees for years 2005 and 2004 were for the audit of the Employee Stock Ownership Plan (ESOP) and the 401(k) Retirement Plan and research and discussions regarding miscellaneous audit and accounting issues. These services were pre-approved by the Audit Committee.
Tax Fees were for the preparation of the federal income tax return and related tax planning and State tax-related items and related planning. Such tax consulting work was pre-approved by the Audit Committee.
The Audit Committee of the Board believes that the non-audit services provided by the independent auditors are compatible with maintaining the auditors independence.
The Audit Committee has reviewed the independent auditors performance and credentials (and those of the lead partner) determining they are well qualified for the job and has agreed to retain Moss Adams LLP as the Companys independent auditing firm for the ensuing year.
The Audit Committee has reviewed and approved the Companys internal audit and accounting controls. The Committee has established procedures for the confidential and anonymous submission of concerns regarding accounting and auditing matters and has not received any concerns in this regard. The procedures are communicated to the employees on an annual basis.
Submitted by the members of the Audit Committee:
The Audit Committee and the Board have appointed Moss Adams LLP, Everett, Washington, independent public accountants, as the Companys independent auditors for the 2006 fiscal year. A representative of Moss Adams LLP will be present at the Annual Meeting to respond to questions from shareholders and will have the opportunity to make a statement if he or she so desires.
(1) The potential realizable value portion of the table illustrates value that might be realized upon exercise of the options immediately prior to the expiration of the term, assuming the specified compounded rates of appreciation on the Companys Common Stock over the term of the options, but it is not intended to forecast future price appreciation of the Companys Common Stock. It is important to note that options have value to the listed executive only if the stock price increases above the exercise price shown in the table during the effective option period. These numbers do not take into account certain provisions of the options providing for cancellation of the option following termination of employment.
(2) Option to acquire shares of Common Stock, which vest one third annually, beginning two years after grant of the option.
(3) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Committee at the time of grant and may consist of cash, check, delivery of a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale proceeds necessary to pay the exercise price, or such other payment method approved by the Committee. If the Optionee is an officer of the Company within the meaning of Section 16 of the Exchange Act, he or she may in addition be allowed to pay all or part of the purchase price with Shares. Shares used by officers to pay the exercise price shall be valued at their fair market value on the exercise date.
(1) The closing price for the Companys Common Stock as reported on the Nasdaq Stock Market effective December 30, 2005, was $25.93. The values indicated reflect the reduction for the payment of the exercise price of applicable options.
Employment Contracts, Severance Agreements and Change in Control Agreements
First Mutual Bank and John R. Valaas are parties to an Employment Agreement dated January 1, 2002, whereby Mr. Valaas agreed to continue to serve as President and Chief Executive Officer of First Mutual Bank. The agreement has a five-year term and will terminate on December 31, 2006, and provides that Mr. Valaas is entitled to a base salary of no less than $250,000 per year, plus fringe benefits generally provided officers of First Mutual Bank, and is eligible to participate in First Mutual Banks bonus plan. Mr. Valaas is also eligible for discretionary grants of stock options under the Companys stock option plan.
First Mutual Bank has also agreed that in the event of a termination of Mr. Valaas employment (whether voluntary or otherwise) following any future Change in Control of First Mutual Bank, Mr. Valaas will be entitled to payment of his base salary for a period of 35 months following termination, with all stock options immediately vesting. A Change in Control occurs when one person or entity (other than a group including two or more of the Companys present directors) becomes the owner of 25% or more of the Companys outstanding Common Stock, upon replacement of a majority of the incumbent directors by directors whose elections have not been supported by the present Board, or upon dissolution or sale of 70% or more in value of the assets of First Mutual Bank (Change of Control).
On January 1, 2002, First Mutual Bank entered into an Employment Agreement with Roger A. Mandery, whereby Mr. Mandery agreed to continue to serve as Executive Vice President of First Mutual Bank. The agreement has a five-year term and will terminate on December 31, 2006, and provides that Mr. Mandery is entitled to an annual base salary of no less than $195,000, plus fringe benefits generally provided officers of First Mutual Bank, and is eligible to participate in First
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FIRST MUTUAL BANCSHARES, INC.
ANNUAL MEETING OF SHAREHOLDERS
April 27, 2006
The undersigned shareholder of First Mutual Bancshares, Inc. hereby appoints Messrs. F. Kemper Freeman, Jr. and John R. Valaas of First Mutual Bancshares, Inc. and either of them, with power of substitution to each, to act as proxies to represent the undersigned at the Annual Meeting of Shareholders, to be held at the Hyatt Regency Bellevue, Bellevue, Washington, on April 27, 2006, at 3:00 p.m., Pacific time, and at any and all adjournments thereof, and to vote all of the shares of Common Stock of First Mutual Bancshares, Inc., which the undersigned is entitled to vote as fully as if the undersigned were present in person, in the manner indicated on the reverse hereof. Receipt of the Notice of Meeting and the accompanying Proxy Statement is hereby acknowledged.
This Proxy, when properly executed, will be voted in the manner directed on this proxy card. If no specification is made, a vote FOR the election of directors will be entered, and in the discretion of the Proxies designated by the Board of Directors as to any other matter which may properly come before the Meeting.
Should the undersigned be present and elect to vote in person at the Annual Meeting or at any adjournment thereof, upon notification to the Corporate Secretary of First Mutual Bancshares, Inc. at the Meeting of the shareholders decision to terminate the proxy, this proxy shall be deemed terminated and of no further force and effect.
(Continued, and to be marked, dated and signed, on the other side)
▲ Detach here from proxy voting card. ▲
You can now access your First Mutual Bancshares account online.
Access your First Mutual Bancshares shareholder/stockholder account online via Investor ServiceDirect ® (ISD).
Mellon Investor Services LLC, Transfer Agent for First Mutual Bancshares, now makes it easy and convenient to get current information on your shareholder account.
Visit us on the web at http://www.melloninvestor.com/isd
Call 1-866-737-9890 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect® is a registered trademark of Mellon Investor Services LLC
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR THE NOMINEES.
Mark Here For Address Change or Comments o
SEE REVERSE SIDE
INSTRUCTION: To withhold authority to vote for one or more individual nominee(s), write that nominees name in the space provided below.
The undersigned hereby revokes any and all prior proxies and acknowledges receipt from the Company prior to the execution of this proxy of Notice of Meeting, the Proxy Statement dated March 17, 2006, and the Report to Shareholders.
Please sign exactly as your name appears to the left. When signing as attorney, executor, administrator, trustee, or guardian, please give your full name. If shares are held jointly, each holder should sign. Please fill in the date the proxy is signed.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS WHICH RECOMMENDS A VOTE FOR EACH OF THE NOMINEES. PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THIS ELECTION.
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED SELF-ADDRESSED POSTAGE-PREPAID ENVELOPE UNLESS YOU VOTE ELECTRONICALLY AS SET FORTH BELOW.
▲ Detach here from proxy voting card ▲
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11:59 PM EST
the day prior to the day of the Annual Meeting.
Your telephone or Internet vote authorizes the named proxies
to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
You can view the Annual Report and Proxy Statement
on the internet at: http://www.firstmutual.com