SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant: [X]
Filed by a Party other than the Registrant: [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Materials Pursuant to ss. 240.14a-11(c) or ss.240.14a-12
PACIFIC CAPITAL BANCORP
--------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
PACIFIC CAPITAL BANCORP
--------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] 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:
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>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
PACIFIC CAPITAL BANCORP
To Be Held May 18, 1999
TO THE SHAREHOLDERS OF PACIFIC CAPITAL BANCORP:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its Board of Directors, an
annual Meeting of Shareholders (the "Meeting") of Pacific Capital Bancorp
(formerly Santa Barbara Bancorp) (the "Company") will be held at the Lobero
Theater, 33 East Canon Perdido, Santa Barbara, California, on Tuesday, May 18,
1999, at 2:00 P.M., for the purpose of considering and voting on the following
matters:
1. Election of Directors. Electing twelve (12) persons to the Board of
Directors to serve until the 2000 Annual Meeting or until their
successors are elected and have qualified. The persons nominated by
the Board to serve as Directors are: Donald M. Anderson, Edward E.
Birch, Richard M. Davis, Dale E. Hanst, D. Vernon Horton, Roger C.
Knopf, Clayton C. Larson, Kathy J. Odell, William H. Pope, Harry B.
Powell, David W. Spainhour and William S. Thomas, Jr.;
2. Fair Price protection. Readoption of Article FOURTH of the Company's
Articles of Incorporation which provides that shareholders of the
Company will receive fair and equitable treatment in the event of
certain business combinations;
3. Increase Authorized Common Stock. Amendment of Article THIRD of the
Company's Articles of Incorporation to increase the authorized number
of shares of Common Stock to sixty million (60,000,000) shares.
4. Authorize Preferred Stock. Amendment of Article THIRD of the Company's
Articles of Incorporation to authorize one million (1,000,000) shares
of undesignated Preferred Stock;
5. Selection of Auditors. To vote upon a recommendation of the Board of
Directors of the Company to approve the selection of Arthur Andersen,
LLP to serve as independent certified public accountants for the
Company for the 1999 calendar year; and
6. Other Business. Transacting such other business as may properly come
before the Meeting, and any adjournments thereof.
The Board of Directors has fixed the close of business on April 6, 1999 as the
record date for determination of shareholders entitled to notice of, and the
right to vote at, the Meeting.
Section 3.6 of the By-laws sets forth the procedure for nomination of
Directors. That Section provides:
"Section 3.6 Nomination of Directors.
3.6.1 Authority to Make Nominations. Nominations for Directors may be
made by the Board of Directors or by any holder of record of any
outstanding class of capital stock of the Corporation entitled to vote for
the election of Directors.
3.6.2 Nomination Procedures. At annual meetings and special meetings
of the shareholders called by the Board of Directors, nominations for
Directors, other than those approved by the Board of Directors of the
Corporation, shall be made in writing and shall be delivered or mailed to
the Secretary of the Corporation at its principal place of business not
less than fourteen (14) days nor more than fifty (50) days prior to
scheduled date of the meeting; provided, however, that if less than
twenty-one (21) days' notice of the meeting is given to the shareholders,
such nominations shall be mailed or delivered to the Secretary of the
Corporation not later than the close of business on the seventh (7th) day
following the day on which notice of the meeting was mailed to the
shareholders. Any such notification shall (a) be accompanied by a written
statement signed and acknowledged by the nominee consenting to his or her
nomination and agreeing to serve as Director if elected by the
shareholders, and (b) shall contain the following information, to the
extent known to the nominating shareholder:
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A. The name and address of each proposed nominee;
B. The total number of shares of capital stock of the
Corporation expected to be voted for each proposed
nominee;
C. The principal occupation of each proposed nominee;
D. The name and residence address of the nominating share-
holder; and
E. The number of shares of capital stock of the Corpora-
tion owned by the nominating shareholder.
3.6.3 Defective Nominations. Nominations not made in accordance with
this Section 3.6 may be disregarded by the Chairperson of the meeting, at
his or her discretion, and upon the instructions of the Chairperson, the
inspectors of the election may disregard any votes cast for any such
nominee.
3.6.4 Exceptions. The provisions of this Section 3.6 shall apply only
to nominations for Directors who are to be elected at the annual meeting or
any special meeting of shareholders called by the Board of Directors, and
this Section shall not apply to (a) nominations for Directors who are to be
elected at a special meeting of shareholders properly called by the
shareholders at which Directors are to be elected pursuant to Section 305
of the California Corporations Code to fill a vacancy on the Board of
Directors, or (b) the election of Directors by the written consent of the
shareholders pursuant to Section 603 of the California Corporations Code."
You are urged to vote in favor of each of the proposals by so indicating on the
enclosed proxy and by signing and returning the enclosed proxy as promptly as
possible, whether or not you plan to attend the Meeting in person. The enclosed
proxy is solicited by the Company's Board of Directors. Any shareholder giving a
proxy may revoke it prior to the time it is voted by notifying the Secretary, in
writing, to that effect, by filing with him a later dated proxy, or by voting in
person at the Meeting.
By Order of the Board of Directors
----------------------------------
Donald M. Anderson
Chairman of the Board
Dated: April ___, 1999
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OF
PACIFIC CAPITAL BANCORP
200 E. Carrillo Street
Santa Barbara, CA 93101
To Be Held May 18, 1999
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of proxies
for use at the Annual Meeting of Shareholders (the "Meeting") of Pacific Capital
Bancorp (formerly Santa Barbara Bancorp) (the "Company"), to be held at the
Lobero Theater, 33 E. Canon Perdido, Santa Barbara, California, 93101, at 2:00
P.M. on Tuesday, May 18, 1999, and at all adjournments thereof.
It is expected that this proxy statement and accompanying Notice and form of
proxy will be mailed to shareholders on or about April ___, 1999.
The matters to be considered and voted upon at the Meeting will include:
1. Election of Directors. Electing twelve (12) persons to the Board of
Directors to serve until the 2000 Annual Meeting or until their
successors are elected and have qualified. The persons nominated by
the Board to serve as Directors are: Donald M. Anderson, Edward E.
Birch, Richard M. Davis, Dale E. Hanst, D. Vernon Horton, Roger C.
Knopf, Clayton C. Larson, Kathy J. Odell, William H. Pope, Harry B.
Powell, David W. Spainhour and William S. Thomas, Jr.;
2. Fair Price protection. Readoption of Article FOURTH of the Company's
Articles of Incorporation which provides that shareholders of the
Company will receive fair and equitable treatment in the event of
certain business combinations;
3. Increase Authorized Common Stock. Amendment of Article THIRD of the
Company's Articles of Incorporation to increase the authorized number
of shares of Common Stock to sixty million (60,000,000) shares.
4. Authorize Preferred Stock. Amendment of Article THIRD of the Company's
Articles of Incorporation to authorize one million (1,000,000) shares
of undesignated Preferred Stock;
5. Selection of Auditors. To vote upon a recommendation of the Board of
Directors of the Company to approve the selection of Arthur Andersen,
LLP to serve as independent certified public accountants for the
Company for the 1999 calendar year; and
6. Other Business. Transacting such other business as may properly come
before the Meeting, and any adjournments thereof.
REVOCABILITY OF PROXIES
A proxy for use at the Meeting is enclosed. Any shareholder who executes and
delivers such proxy has the right to revoke it at any time before it is
exercised, (a) by filing with the Secretary of the Company an instrument
revoking it, or (b) by executing a proxy bearing a later date, or (c) by
attending the Meeting and voting in person. Subject to such revocation or
suspension, all shares represented by a properly executed proxy received in time
for the Meeting will be voted by the proxy-holders, in accordance with the
instructions on the proxy.
In addition, a holder of the Company's Common Stock who previously signed and
returned a proxy and who elects to attend the Meeting and vote in person may
withdraw his or her proxy at any time before it is exercised by giving notice of
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such revocation to the Secretary of the Company at the Meeting. Shareholders
whose shares of the Company's Common Stock are not registered in their own name
will need additional documentation from the record holder of such shares to vote
personally at the Meeting. All written notices of revocation and other
communications with respect to revocation of the Company's proxies should be
addressed to Pacific Capital Bancorp, P.O. Box 1119, Santa Barbara, California,
93102-1119, Attention: Jay D. Smith, Corporate Secretary.
PERSONS MAKING THE SOLICITATION
This solicitation of proxies is being made by the Board of Directors of the
Company. The expense of preparing, assembling, printing and mailing this proxy
statement and the material used in the solicitation of proxies for the Meeting
will be borne by the Company. It is contemplated that proxies will be solicited
principally through the use of the mail, but officers, directors, and employees
of the Company may solicit proxies personally or by telephone, without receiving
special compensation therefor. Although there is no formal agreement to do so,
the Company may reimburse banks, brokerage houses, and other custodians,
nominees and fiduciaries for their reasonable expense in forwarding these proxy
materials to their principals. The proxy materials will first be sent or given
to shareholders on or about April ___, 1999.
QUORUM VOTING AND REVOCATION OF PROXIES
There were issued and outstanding __________ shares of the Company's common
stock on April 6, 1999. April 6, 1999 has been fixed as the record date for
the purpose of determining the shareholders entitled to notice of, and to vote
at, the Meeting (the "Record Date").
Each share of the Company's Common Stock is entitled to one vote, in person or
by proxy, on each matter to be voted upon at the Meeting. Since the affirmative
vote of the holders of a majority of the outstanding shares of the Company's
Common Stock is required to approve the matters to be considered at the Meeting
(other than Proposal 1, Election of Directors), non-voting shares and
abstentions will have the effect of a vote "against" such matters. Directors
shall be elected by a plurality of the votes cast. In addition, brokers who hold
shares of the Company's Common Stock in street name for customers who are the
beneficial owners of such shares are prohibited from giving a proxy to vote
shares held for such customers with respect to the matters to be considered and
voted upon at the Meeting without specific instructions from such customers. The
failure of such customers to provide specific instructions with respect to their
shares of the Company's Common Stock to their broker (so-called "broker
non-votes") will have the effect of a vote "against" such matters.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of stock entitled to vote at the Meeting will constitute a
quorum for the purpose of transacting business at the meeting.
If the enclosed proxy is completed in the appropriate spaces, signed, dated and
returned, the proxy will be voted as specified in the proxy. If no specification
is made on a signed, dated and returned proxy, it will be voted at the
discretion of the proxy holders on any matter described in this proxy statement.
The proxy also grants the proxy holders authority to vote as they deem
appropriate, in their sole discretion, on such other business as may properly
come before the Meeting or any adjournments thereof.
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IF NO INSTRUCTION IS SPECIFIED WITH REGARD TO A MATTER TO BE ACTED UPON, THE
SHARES REPRESENTED BY THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE
RECOMMENDATIONS OF MANAGEMENT.
ELECTION OF DIRECTORS OF COMPANY
(Proposal 1)
The By-laws of the Company provide that the number of Directors shall not be
less than nine (9) nor more than seventeen (17) until changed by an amendment to
the Articles of Incorporation or the By-laws duly adopted by the Company's
shareholders. The By-laws further provide that the exact number of Directors
shall be fixed from time-to-time within the stated range by a by-law, by-law
amendment, or resolution adopted by the Company's shareholders or Board of
Directors. At its February 26, 1999 meeting, the Board of Directors amended the
By-laws to decrease the exact number of Directors from fifteen (15) to twelve
(12). Under California law, the existing Directors remain in office until the
end of their term as Directors and the amendment to decrease the authorized
number of Directors is effective with respect to the election of Directors at
the Meeting. Therefore, the shareholders will elect twelve (12) Directors at the
Meeting.
The Directors adopted the amendment in the interest of improving the operation
of the Board of Directors. The amendment was unanimously approved by all
Directors. Messrs. Barranco, Cox, Guntermann and Ms. Trescher have agreed not to
stand for re-election as Directors. They will continue to serve as Directors of
Santa Barbara Bank & Trust. Neither the amendment nor the decision of either of
Messrs. Barranco, Cox, Guntermann or Ms. Trescher was prompted by any dispute
among any of the Directors with respect to the management of the Company or any
other matter.
At the Meeting, twelve (12) Directors (the entire Board of Directors) are to be
elected to serve until the next Annual Meeting of Shareholders or until their
successors are elected and qualified. At the special meeting of the shareholders
held on December 15, 1998, a majority of the shareholders voted to amend the
Articles of Incorporation of the Company to eliminate cumulative voting for the
election of directors.
A shareholder may withhold authority for the proxy holders to vote for any or
all of the nominees identified below by so indicating on the enclosed proxy.
Further, a shareholder may withhold authority for the proxy holders to vote for
an individual nominee by striking through the nominee's name on the proxy.
Unless authority to vote for the nominees is so withheld, the proxy holders will
vote the proxies received by them for the election of the nominees identified
below as Directors of the Company. Should any shareholder vote for a nominee not
identified below and who was properly nominated, the proxy holders will vote
such shareholder's shares in accordance with his or her wishes. If any of the
nominees identified below should be unable or decline to serve, which is not now
anticipated, the proxy holders shall have discretionary authority to vote for a
substitute at the Meeting (or any adjournment thereof), or alternatively, a
substitute may be designated by the present Board of Directors to fill the
resulting vacancy. In the event that additional persons are nominated for
election as Directors, the proxy holders intend to vote all of the proxies
received by them in such a manner as will assure the election of as many of the
nominees identified below as possible. In such event, the specific nominees to
be voted for will be determined by the proxy holders.
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None of the Directors or Executive Officers of the Company or its subsidiaries,
Santa Barbara Bank & Trust ("SBBT") or First National Bank of Central California
("FNBCC"), was selected pursuant to any arrangement or understanding between
themselves and any other individual (other than arrangements or understandings
with Directors or officers acting solely in their capacities as such). There are
no family relationships between any of the Directors and Executive Officers, and
except as noted below, none serve as Directors of any company which has a class
of securities registered under or which is subject to the periodic reporting
requirements of the Securities Exchange Act of 1934 or any investment company
registered under the Investment Company Act of 1940.
Directors and Nominees
The following table sets forth as to each of the persons nominated for election
as a Director of the Company, such person's age, such person's principal
occupations during the past five years, and the period during which such person
has served as a Director of the Company. All of the nominees except D. Vernon
Horton, Roger C. Knopf, Clayton C. Larson, Kathy J. Odell and William H. Pope,
were elected as Directors of the Company at the 1998 Annual Meeting of the
Company's shareholders. Messrs. Horton, Knopf, Larson and Pope were appointed
Directors at the December 15, 1998 Special Meeting of the Board of Directors.
<TABLE>
<CAPTION>
Director Background, Business Experience, and
Director Age Since Position with the Company/Bank
-------- --- -------- ------------------------------------
<S> <C> <C> <C>
Donald M. Anderson 71 1971 Chairman of the Board of the Company and Vice Chairman of SBBT.
Mr. Anderson joined SBBT in October, 1969, as Vice President and
Commercial Lending Officer. He was elected President, CEO and
director in 1971 and served in those capacities until elected
Chairman of the Board in February, 1989. He has served on
numerous charitable, civic and banking organizations.
Edward E. Birch 60 1983 Dr. Birch was Vice Chancellor of the University of California at Santa
Barbara from 1976 until his retirement in 1993. He is currently
Executive Vice President for Westmont College in Santa Barbara,
California. He has been involved in a number of civic and community
organizations, including the Cancer Foundation of Santa Barbara,
Goleta Valley Community Hospital, the Santa Barbara Industry
Education Council, and the Santa Barbara Chamber of Commerce. Dr.
Birch is Chairman of the Corporate
Governance/Nominating/Compensation Committee of the Company.
Richard M. Davis 64 1984 Mr. Davis is a retired business executive. He is a past Chairman of the
Board of Directors of Santa Barbara Cottage Hospital, a past Chairman
of the Santa Barbara Chamber of Commerce, and a past Chairman of
the Board of United Way of Santa Barbara.
Dale E. Hanst 67 1983 Mr. Hanst is a retired attorney. He was of counsel to the law firm of
Reicker, Clough, Pfau & Pyle, LLP and was formerly a senior partner
in the law firm of Schramm & Raddue, having started with the firm in
1960. He was President of the State Bar of California in 1984 and
served on the California Commission on Judicial Performance from
1984 to 1988. Mr. Hanst is a past President of the Santa Barbara
Zoological Society.
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D. Vernon Horton 59 1998 Mr. Horton is Vice Chairman of the Board of the Company and Chief
Executive Officer and a director of First National Bank of Central
California. He was Chairman of the Board and Chief Executive Officer
of the former Pacific Capital Bancorp. His banking career commenced
in 1964 with Valley National Bank, Salinas. He served that bank in
various capacities including lending, operations, and business
development and in 1979 was appointed Chief Executive Officer and
a member of the Board of Directors. In August of 1981, he was
appointed President of Valley National Bank. He resigned all positions
with Valley National Bank on December 31, 1983, to join First
National Bank of Central California. He serves as a director of Cherry's
Jubilee and the California Rodeo Association. Mr. Horton was
appointed to the Board of the Company in December, 1998 following
the merger.
Roger C. Knopf 58 1998 Mr. Knopf is the President of Knopf Construction, Inc., a general
building construction company located in Morgan Hill since 1976. He
was a director of the former Pacific Capital Bancorp and South Valley
National Bank and is currently a director of First National Bank of
Central California. Mr. Knopf attended San Jose State University. He
is a past President of the Santa Clara County Landowners Association
and the Morgan Hill Rotary Club. He has served on many County of
Santa Clara, City of Morgan Hill, and Morgan Hill Unified School
District committees. He is presently Chairman of the Board of San Jose
Medical Center and is a director of San Benito Land Title Company and
the Morgan Hill Rotary Endowment Fund. Mr. Knopf was Morgan Hill
Citizen of the Year in 1989. Mr. Knopf was appointed to the Board of
the Company in December, 1998 following the merger.
Clayton C. Larson 52 1998 Mr. Larson is Vice Chairman of the Board of the Company and
President, Chief Administrative Officer and a director of First National
Bank of Central California. He was President and a director of the
former Pacific Capital Bancorp. Mr. Larson's banking career
commenced in 1972 when he joined Valley National Bank. During his
tenure with Valley National Bank, he attained the position of Senior
Vice President/Branch Administrator and in 1981 became a director of that
bank. He serves on the Board of Trustees of the Monterey Institute of
International Studies, Community Hospital of the Monterey Peninsula and
the California State University Monterey Bay Foundation Board. He is
President of the Coalition for Research in Education (CORE), and
serves on the Advisory Boards for Leadership Monterey Peninsula, Legal
Services for Seniors and the Monterey Peninsula Chamber of Commerce.
Kathy J. Odell 53 Ms. Odell is the Chief Operating Officer of Karl Storz Imaging, Inc.,
which she co-founded in 1985 as Medical Concepts, Inc. She is also
President of Karl Storz Veterinary Endoscopy and a director of both
corporations. She is currently Chairman of the Santa Barbara Region
Economic Community Project and serves on the boards of the Santa
Barbara Chamber of Commerce, Santa Barbara Industrial Association.
and is a member of the Advisory Council of the College of Engineering,
University of California at Santa Barbara. She was appointed to the
Board of Santa Barbara Bank & Trust in June of 1998.
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William H. Pope 71 1998 William H. Pope is a retired certified public accountant. He was a
director of the former Pacific Capital Bancorp and is currently a director
of First National Bank of Central California. In 1960, Mr. Pope was
instrumental in the formation of the firm of Kasavan and Pope, of which
he was the senior partner, which now has offices in Salinas and
Monterey. He holds memberships in the American Institute of Certified
Public Accountants as well as the California Society of CPAs. Mr.
Pope was appointed to the Board of the Company in December, 1998
following the merger.
Harry B. Powell 70 1989 Mr. Powell is a retired businessman residing in Carpinteria. He is a
past President of Rexall Clubs International, the Carpinteria Business
Association and the Carpinteria Unified School District.
David W. Spainhour 67 1974 Mr. Spainhour is President and Chief Executive Officer of the Company
and Chairman of the Board of SBBT. Mr. Spainhour joined SBBT in 1966
as Controller. He became Cashier in 1969, Senior Vice President in 1972,
was elected to the Board of Directors in 1974, was named Executive Vice
President in 1980, and elected President in February, 1989. He served as
President and CEO of SBBT until December, 1995. Mr. Spainhour serves on
the boards of the Santa Barbara Industry Education Council, Channel City Club,
Covenant Benevolent Institutions, Westmont College, and United Way of Santa
Barbara.
William S. Thomas, Jr. 55 1995 Mr. Thomas is the Vice Chairman and Chief Operating Officer of the
Company and President and Chief Executive Officer of SBBT. Mr. Thomas
joined SBBT in 1994 as Manager of the Trust and Investment Services Division.
Prior to coming to SBBT, Mr. Thomas was an Executive Vice President of Bank
of America and Manager of the Financial Institutions Group from 1992 to 1994.
Prior to that time he spent sixteen years with Security Pacific National Bank
in various capacities until its merger with Bank of America. His last position
with Security Pacific was Executive Vice President and Manager, Financial
Institutions. He is a member of the Board of Directors of the Santa
Barbara Chamber of Commerce, Santa Barbara Symphony, Santa Barbara Museum
of Art, C.A.L.M, Los Padres Council, Boy Scouts of America and El Adobe
Corporation.
</TABLE>
Committees of the Board of Directors
The Company had a standing Nominating Committee and Audit Committee during 1998.
During 1998 the Nominating Committee, which considers the qualifications and the
composition of the Board of Directors of the Company, was composed of Messrs.
Birch, Hanst, Guntermann, and Powell. The Committee met six (6) times in 1998.
The Committee does not consider shareholder nominations for Director's
positions.
Section 3.6 of the By-laws sets forth the procedure for nomination of
Directors. That Section provides:
"Section 3.6 Nomination of Directors.
3.6.1 Authority to Make Nominations. Nominations for Directors may be
made by the Board of Directors or by any holder of record of any
outstanding class of capital stock of the Corporation entitled to vote for
the election of Directors.
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3.6.2 Nomination Procedures. At annual meetings and special meetings
of the shareholders called by the Board of Directors, nominations for
Directors, other than those approved by the Board of Directors of the
Corporation, shall be made in writing and shall be delivered or mailed to
the Secretary of the Corporation at its principal place of business not
less than fourteen (14) days nor more than fifty (50) days prior to
scheduled date of the meeting; provided, however, that if less than
twenty-one (21) days' notice of the meeting is given to the shareholders,
such nominations shall be mailed or delivered to the Secretary of the
Corporation not later than the close of business on the seventh (7th) day
following the day on which notice of the meeting was mailed to the
shareholders. Any such notification shall (a) be accompanied by a written
statement signed and acknowledged by the nominee consenting to his or her
nomination and agreeing to serve as Director if elected by the
shareholders, and (b) shall contain the following information, to the
extent known to the nominating shareholder:
A. The name and address of each proposed nominee;
B. The total number of shares of capital stock of the Corporation
expected to be voted for each proposed nominee;
C. The principal occupation of each proposed nominee;
D. The name and residence address of the nominating shareholder; and
E. The number of shares of capital stock of the Corporation owned by
the nominating shareholder.
3.6.3 Defective Nominations. Nominations not made in accordance with
this Section 3.6 may be disregarded by the Chairperson of the meeting, at
his or her discretion, and upon the instructions of the Chairperson, the
inspectors of the election may disregard any votes cast for any such
nominee.
3.6.4 Exceptions. The provisions of this Section 3.6 shall apply only
to nominations for Directors who are to be elected at the annual meeting or
any special meeting of shareholders called by the Board of Directors, and
this Section shall not apply to (a) nominations for Directors who are to be
elected at a special meeting of shareholders properly called by the
shareholders at which Directors are to be elected pursuant to Section 305
of the California Corporations Code to fill a vacancy on the Board of
Directors, or (b) the election of Directors by the written consent of the
shareholders pursuant to Section 603 of the California Corporations Code."
The Audit Committees of the Company, SBBT and FNBCC provide for suitable annual
examinations of each branch office and administrative division of the banks. The
Committees are responsible for reporting the results of the examinations and the
adequacy of internal controls and procedures to the Board. The Audit Committees
are also responsible for recommending to the Board any changes in doing business
or corrective actions necessary for the soundness of the banks and the Company.
The members of the Audit Committee of the Company during 1998 were Anthony
Guntermann, Chairman, Frank Barranco, Edward Birch, Terrill F. Cox, Richard M.
Davis, Dale E. Hanst, Harry B. Powell and Susan Trescher. The Audit Committee of
the Company met nine (9) times during 1998.
The members of the Company's Compensation and Stock Option Committee during 1998
were Dale E. Hanst, Anthony Guntermann, Richard M. Davis, and Harry B. Powell.
They met seven (7) times during 1998 to determine what the Company's salary
philosophy should be, set the objectives of the Company's Salary Administration
Program, approve exempt salary ranges, determine Senior Officers' salaries and
perform the function of overseer to ensure that the objectives of the Salary
Administration Program were being met. The Committee also administers the
Company's stock option plans.
The full Board of Directors met twelve (12) times during 1998. No Director
attended fewer than 75 percent of the total number of meetings of the Board and
of the committees of which he or she is a member.
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Executive Officers
Except for Messrs. Anderson, Horton, Larson, Spainhour and Thomas, the following
table sets forth as to each of the persons who currently serves as an Executive
Officer of the Company or its subsidiaries, SBBT or FNBCC, such person's age,
such person's principal occupations during the past five years, such person's
current position with the Company and the Bank, and the period during which the
person has served in such position. Each of the Executive Officers named herein
serves at the pleasure of the Board. The information for Messrs. Anderson,
Horton, Larson, Spainhour and Thomas is provided on pages 4, 5 and 6 of this
proxy statement.
<TABLE>
<CAPTION>
Officer Age Position and Principal Occupations During the Past Five Years
- ------- --- -------------------------------------------------------------
<S> <C> <C>
David A. Abts 55 Currently serves as Executive Vice President and Chief Information Officer of the
Company and Executive Vice President of SBBT. From March, 1997 to January,
1999 he was Executive Vice President of the Company and Executive Vice
President MIS/Operations and Retail Banking for SBBT. From July, 1989 to
March, 1997 he was Senior Vice President of MIS/Operations for SBBT.
Donald E. Barry 59 Currently serves as Executive Vice President of the Company and Executive Vice
President and Manager of both Wholesale and Retail Banking of SBBT, which
includes the Trust & Investment Division. From July, 1995 when Mr. Barry joined
the Bank, until January, 1999, he served as Executive Vice President of the
Company and Executive Vice President and Manager of the Wholesale Banking
Division. Before joining the Company, he was a Regional Vice President of Chase
Manhattan Bank in charge of private banking from February, 1993 to July, 1995.
Donald E. Lafler 52 Currently serves as Senior Vice President and Chief Financial Officer of the
Company and SBBT. From 1987 to 1995 he served as Vice President and Principal Accounting Officer
of SBBT.
Perry N. Ritenour 54 Currently serves as Director of Risk Management for the Company. Mr. Ritenour
joined SBBT in May, 1995 as Senior Vice President, Senior Credit Administrator. Prior to
that, he worked for City National Bank in Los Angeles for 3 years as a Senior Vice President in
credit and as the General Manager of the bank's international division.
Jay D. Smith 58 Currently serves as Senior Vice President, General Counsel and Corporate
Secretary of the Company and SBBT. He has served as Legal Counsel of the SBBT
since July, 1979.
Catherine R. Steinke 45 Currently serves as a Senior Vice President and Director of the Human Resources
Division of SBBT. She has served in this position since March, 1993.
Kent M. Vining 51 Currently serves as Senior Vice President and Strategic Planning Officer of the
Company and the SBBT. He served as Chief Financial Officer of SBBT from April
1980 until July 1, 1995.
</TABLE>
Common Stock Ownership of Directors, Executive Officers and Certain Principal
Shareholders
The following table sets forth information concerning the beneficial ownership
of the Company's common stock as of March 11, 1998, by each Director, by each
Named Officer (as defined on page 10), by the Directors and Executive Officers
as a group, and by beneficial owners of more than 5 percent of the Company's
outstanding common stock.
<TABLE>
<CAPTION>
Number of
Shares and
Nature of Percent
Beneficial of
Ownership (1) Class (2)
<S> <C> <C> <C>
Beneficial Owner
Santa Barbara Bank & Trust, Trustee of the Pacific Capital Bancorp 1,505,109 6.22%
Employee Stock Ownership Trust
820 State Street
Santa Barbara, CA 93101
Directors
Donald M. Anderson 537,960 (3) 2.22%
Edward E. Birch 48,190 (4) 0.20%
Richard M. Davis 46,711 (5) 0.19%
Dale E. Hanst 112,241 (6) 0.46%
D. Vernon Horton 192,423 (7) 0.79%
Roger C. Knopf 247,361 (8) 1.02%
Clayton C. Larson 212,588 (9) 0.88%
Kathy J. Odell 0 (10) -0-
William H. Pope 59,518 (11) 0.25%
Harry B. Powell 36,247 (12) 0.15%
David W. Spainhour 461,998 (13) 1.91%
William S. Thomas, Jr. 113,714 (14) 0.47%
Named Officers
David A. Abts 87,562 (15) 0.36%
Donald E. Barry 41,790 (16) 0.17%
John J. McGrath (Retired on March 2, 1999) 148,847 (17) 0.61%
All Directors and Executive Officers as a Group (18 individuals) 2,686,873 (18) 11.10%
<FN>
(1) Includes all shares beneficially owned, whether directly or indirectly,
together with known associates. Also includes any shares owned, whether
jointly or as community property, with a spouse and shares allocated to
Named Officers under the Company's Employee Stock Ownership Plan ("ESOP").
Also includes any stock acquirable by exercise of stock options exercisable
within 60 days following March 11, 1999. All share data are stated as of
March 11, 1999.
(2) Percentages are stated to include exercisable stock options accounted for
in the column listing "Number of Shares and Nature of Beneficial
Ownership." See Footnote (1) above.
9
<PAGE>
(3) Includes 21,830 shares acquirable by exercise of exercisable stock options.
(4) Includes 18,102 shares acquirable by exercise of exercisable stock options.
(5) Includes 2,000 shares acquirable by exercise of exercisable stock options.
(6) Includes 36,895 shares acquirable by exercise of exercisable stock options.
(7) Includes 32,001 shares acquirable by exercise of exercisable stock options.
(8) Includes 20,317 shares acquirable by exercise of exercisable stock options.
(9) Includes 32,001 shares acquirable by exercise of exercisable stock options.
(10) Includes -0- shares acquirable by exercise of exercisable stock options.
(11) Includes -0- shares acquirable by exercise of exercisable stock options.
(12) Includes 7,050 shares acquirable by exercise of exercisable stock options.
(13) Includes 14,759 shares acquirable by exercise of exercisable stock options.
(14) Includes 103,600 shares acquirable by exercise of exercisable stock
options.
(15) Includes 87,562 shares acquirable by exercise of exercisable stock options.
(16) Includes 41,790 shares acquirable by exercise of exercisable stock options.
(17) Includes 148,847 shares acquirable by exercise of exercisable stock
options.
(18) Includes 447,246 shares acquirable by exercise of exercisable stock
options. Actual share ownership as of March 11, 1999, by the Directors and
Executive Officers was 2,209,627.
</FN>
</TABLE>
EXECUTIVE COMPENSATION
Executive Officers of the Company did not receive any compensation from the
Company but derived all of their compensation as executive officers of SBBT in
1998. Shown below is information concerning the annual and long-term
compensation for services in all capacities to SBBT for the fiscal years ended
December 31, 1998, 1997, and 1996, of those persons who were, as of December 31,
1998, (i) the Chief Executive Officer and (ii) the other four most highly
compensated Executive Officers of SBBT (the "Named Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Awards
----------------------------------------- ------
Other Securities
Annual Underlying All Other
Salary Bonus (1) Compensation (2) Options (3) Compensation (4)
Name and Principal Position Year (Dollars) (Dollars) (Dollars) (Number) (Dollars)
- --------------------------- ---- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
David W. Spainhour 1998 191,984 100,000 520,432 18,429 46,703
President and CEO of the 1997 190,896 75,000 265,605 32,560 44,105
Company and Chairman of 1996 190,182 -0- 344,725 45,670 41,101
the Board of SBBT
10
<PAGE>
William S. Thomas, Jr. 1998 290,013 175,000 98,834 -0- 55,208
Vice Chairman and Chief 1997 243,353 125,000 68,623 30,000 20,931
Operating Officer of the 1996 247,469 -0- 2,938 60,000 20,769
Company and President and
Chief Executive Officer of
SBBT
David A. Abts 1998 149,172 90,000 322,347 -0- 21,892
Executive Vice President of the 1997 144,704 75,000 264,828 27,918 25,917
Company and SBBT 1996 137,067 8,000 331,842 34,280 25,054
Donald E. Barry 1998 148,339 90,000 402,322 -0- 15,173
Executive Vice President of the 1997 138,338 83,000 2,250 20,000 20,723
Company and SBBT 1996 163,000 -0- 12,500 20,000 10,734
John J. McGrath 1998 127,028 65,000 679,708 17,352 40,980
Senior Vice President of the 1997 128,365 65,000 555,977 26,400 39,902
Company and Director of the 1996 120,000 -0- 179,905 17,964 34,370
Risk Management Division of
SBBT
<FN>
(1) Amounts in this column represent bonuses awarded by the Company's
Compensation Committee upon evaluation of performance during fiscal years
1997, 1996 and 1995, respectively, but paid during fiscal years 1998, 1997
and 1996, respectively. Please refer to the Report of the Compensation
Committee on page 17 for additional information.
(2) Other Annual Compensation consists of insurance premiums (other than term
insurance) and dues and memberships paid on behalf of the Named Officers
for fiscal year 1998, 1997 and 1996. The amount stated for David W.
Spainhour, William S. Thomas, Jr., David A. Abts, Donald E. Barry and John
J. McGrath in 1998 includes 517,829, 96,000, 320,467, 399,874 and 677,088,
respectively, received in the form of the difference between the price
paid for stock of the Company purchased upon exercise of employee stock
options and the fair market value of such stock at the date of purchase.
(3) Please see the table on pages __ and __ for a detailed explanation.
(4) This column includes the amount of ESOP cash contributions and dividends
paid on ESOP shares allocated to the Named Officers, term life insurance
premiums, amounts contributed by the Company on behalf of the Named
Officers to the Company's Incentive & Investment and Salary Savings Plan
which is a defined contribution profit sharing plan including a 401(k)
savings feature, and the 401(k) matching contribution. Under this Plan, the
Company makes discretionary contributions which are allocated among Plan
participants ratably based on participants' relative compensation levels.
During the Company's last fiscal year, discretionary contributions were
made to the Plan on behalf of the Named Officers in the amounts stated in
the following Table entitled "I & I Discretionary Contributions". Under the
11
<PAGE>
401(k) savings feature of the Plan during 1998, the Company matched $1.00
for every $1.00 of voluntary employee contributions up to 3% of employee
compensation and $.50 for every $1.00 of the next 3% of compensation up to
a maximum of 4.5% of compensation. During the last fiscal year, the Company
made matching contributions on behalf of the Named Officers totaling
$35,962, in the respective amounts set forth in the following Table
entitled "401(k) Matching Contributions".
</FN>
</TABLE>
I & I Discretionary Contributions
David W. Spainhour.......................................... $ -0-
William S. Thomas, Jr....................................... $ -0-
David A. Abts............................................... $ -0-
Donald E. Barry............................................. $ -0-
John J. McGrath............................................. $ -0-
401(k) Matching Contributions
David W. Spainhour.......................................... $ 7,200
William S. Thomas, Jr....................................... $ 7,200
David A. Abts............................................... $ 7,200
Donald E. Barry ............................................ $ 7,200
John J. McGrath............................................. $ 7,162
All Other Compensation also includes contributions, if any, made by the
Company on behalf of the Named Officers under the Company's Employee Stock
Ownership Plan ("ESOP"). During the last fiscal year, the Company made
contributions to the ESOP totaling $35,442 on behalf of the Named Officers.
ESOP Cash Contributions and Dividends
David W. Spainhour........................................... $ 38,640
William S. Thomas, Jr........................................ $ 7,762
David A. Abts................................................ $ 14,446
Donald E. Barry ............................................. $ 7,571
John J. McGrath.............................................. $ 30,602
The specific number of shares allocated to the participant accounts of each
Named Officer for the last fiscal year of the Company from forfeitures are
as follows:
<TABLE>
<CAPTION>
ESOP Share Allocations
Number of Total
Shares Allocated Shares Allocated
Named Officers During 1998 As of 12/31/98
-------------- ----------- --------------
<S> <C> <C>
David W. Spainhour.......................... 307 52,027
William S. Thomas, Jr....................... 295 1,399
David A. Abts............................... 298 12,358
Donald E. Barry ............................ 294 1,085
John J. McGrath............................. 303 38,847
</TABLE>
The dollar value of these shares allocated to the Named Officers' accounts
during 1998 are represented in the table "ESOP Cash Contributions and
Dividends" above, and are included in the above Summary Compensation Table.
12
<PAGE>
All Other Compensation also includes the dollar value of any premiums paid
by the Company during its last fiscal year with respect to term life
insurance for the benefit of the Named Officers. During the last fiscal
year, the dollar value of such premiums paid on behalf of the Named
Officers was as follows:
Term Life Insurance Premiums
David W. Spainhour................................... $ 863
William S. Thomas, Jr................................ $ 246
David A. Abts........................................ $ 246
Donald E. Barry ..................................... $ 402
John J. McGrath...................................... $ 3,216
The Company also maintains for the benefit of the Named Officers and other "key"
employees, its Key Employee Retiree Health Plan, which was adopted by the
Company effective December 29, 1992. This Plan is an unfunded plan which pays a
portion of health insurance coverage for retired key employees and their spouses
(but not dependents). While the Named Officers may be eligible for coverage
under this Plan when they retire, no amounts were paid by the Company during the
last fiscal year for coverage for any Named Officers, nor were any amounts
contributed to the Plan during the last fiscal year. The Company also maintains
a similar program for all of its other employees.
Option Grants
Shown below is information on grants of stock options to the Named Officers
pursuant to the Company's various employee stock option plans during the fiscal
year ended December 31, 1998, which are reflected in the Summary Compensation
Table on page __ as long-term compensation awards.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
--------------------------------------------------------------------------
Number of
Securities Percent of
Underlying Total Options
Options Granted to Exercise Grant Date
Granted in Employees in Price Expiration Present
Name Fiscal 1998(1) Fiscal 1998 (per share) Date Value (2)
---- -------------- ------------- ----------- ------ ----------
<S> <C> <C> <C> <C>
David W. Spainhour.......................... 18,429 * 8.05% $ 28.00 06/12/99 $ -0-
William S. Thomas, Jr....................... None -0-% $ -0- - $ -0-
David A. Abts ............................ None -0-% $ -0- - $ -0-
Donald E. Barry............................. None -0-% $ -0- - $ -0-
John J. McGrath............................. 17,352 * 7.59% $ 24.50 02/27/99 $ -0-
*reload grants
<FN>
(1) Options granted under the Company's Stock Option Plan and Restricted Stock
Option Plan are administered by the Company's Stock Option Committee and
the Board of Directors. All of the above options granted during 1998 were
13
<PAGE>
pursuant to the Restricted Stock Option Plan and, except for reload
options, contained the following terms in addition to those terms set
forth above: (a) they vest over a period of five years at the rate of 20%
per year; and (b) until March 24, 1998, options granted under the
Restricted Stock Option Plan were subject to the restrictions that the
shares issued could not be transferred without the approval of the
Committee for five years following the option grant or two years following
the exercise of the option, whichever was later. The Plan was amended as
of March 24, 1998 to remove this restriction. A "reload" option is granted
when someone exercises a stock option by tendering stock already owned.
The number of shares granted is equal to the number of shares tendered in
payment of the option exercise price and the exercise price is the fair
market value of the Company's stock as of the date the shares are
tendered. Reload options vest and first become exercisable one (1) year
following grant. There are also certain restrictions on reload options
which are described in the Company's stock option plans. All of the
options granted to the Named Officers in 1998 were reload options.
(2) Values are based on a binomial pricing model adapted for use in valuing
executive stock options. The actual value, if any, a Named Officer may
realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised, and there is no assurance that
the value realized by a Named Officer will be at or near the value
estimated by the binomial model. The estimated values under this model are
based on certain assumptions as to variables such as interest rates, stock
price volatility and future dividend yield. The above calculations for the
present value of the options are based on the expected term of 4 years, a
risk-free rate of return ranging from 4.35% to 5.64%, an annual dividend
yield ranging from 2.09% to 3.00%, and stock price volatility of 18.22%.
</FN>
</TABLE>
Option Exercises and Fiscal Year-end Values
Shown below is information with respect to the unexercised options to purchase
the Company's common stock granted to the Named Officers in fiscal 1998 and
prior years under the Company's Stock Option Plan and Restricted Stock Option
Plan and held by them at December 31, 1998.
<TABLE>
<CAPTION>
Aggregate Option Exercises Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options Exercised Options Held At In-the-Money Options at
During Fiscal Year 1998 December 31, 1998 December 31, 1998(1)
------------------------- ------------------- --------------------
Shares
Acquired Value
on Exercise Realized(1)
Name (Number) (Dollars) Exercisable Unexercisable Exercisable Unexercisable
---- -------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David W. Spainhour.............. 36,922 $517,829 14,759 34,429 $ 72,301 $112,124
William S. Thomas, Jr........... 6,000 $ 96,000 91,600 48,000 $1,347,502 $554,705
David A. Abts................... 20,446 $320,467 25,225 20,000 $ 230,612 $175,124
Donald E. Barry................. 25,000 $399,874 7,000 23,000 $ 71,125 $225,874
John J. McGrath................. 45,974 $677,088 14,400 30,352 $ 69,431 $124,533
<FN>
14
<PAGE>
(1) The value realized from options exercised during Fiscal Year 1998 and the
value of unexercised in-the-money options at December 31, 1998 are calculated by
determining the difference between the estimated fair market value of the stock
underlying the options, based on third-party transactions reported to the
Company ($25.75 per share at year end), and the exercise price of the options as
of the exercise date or as of year-end, respectively.
</FN>
</TABLE>
Executive Employment Contracts
The Company has adopted a Management Retention Plan (the "Retention Plan") which
provides for the payment of severance compensation to certain executive officers
of the Company and the Bank if the executive's employment is terminated
following a "Change in control" (as defined below). the Retention Plan was
approved by disinterested members of the Boards of Directors of the Company
during 1998.
In order for an executive to receive benefits under the Retention Plan, the
executive must be terminated involuntarily without cause or be constructively
terminated within 24 months following the Change in Control.
A "Change in Control" will be deemed to have occurred in any of the following
circumstances:
(1) the acquisition of 35% or more of the outstanding voting stock
of the Company by any person or entity, with certain
exceptions for employee benefit plans of the Company or the
Bank;
(2) a change in the composition of the Board during the following
24 months such that those persons serving as directors
immediately prior to the event and those new directors elected
by a vote of at least a majority of such directors do not
constitute at least a majority of the directors of the
Company;
(3) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation in which (a)
the shareholders of the Company own immediately following such
an event at least 51% of the voting securities of the
surviving corporation; (b) the directors of the Company
immediately prior to the event constitute at least two-thirds
of the directors of the surviving corporation; and (c) no
person other than the Company, any employee benefit plan of
the Company and certain other existing shareholders, benefici-
ally owns 35% or more of the outstanding voting securities of
the surviving corporation; or
(4) the complete liquidation of the Company, or the sale of all or
substantially all of the Company's or the Bank's assets.
A constructive termination is deemed to have occurred if (a) the executive
resigns following (i) a 25% or greater reduction in the executive's annual
compensation (base salary plus bonus), (ii) a material reduction in the
executive's responsibilities, (iii) a relocation by more than 35 miles of the
principal place at which the executive works, (iv) a material reduction in the
executive's kind or level of employee benefits, (v) without the executive's
written consent, the termination of the executive's status as a member of the
Senior Leadership Team of the Company, (b) any purported termination of the
executive by the Company which is not effected for Cause or as a result of the
executive's death or disability, or (c) the failure of the surviving corporation
in any merger or reorganization with the Company to assume the Retention Plan.
15
<PAGE>
The amount of severance benefits payable to an executive is an amount equal to a
specified percentage of the executive's average annual compensation. The
severance percentage varies from 200% of the average annual compensation for the
Chairman of the Board of the Company and four other executives to 100% of the
average annual compensation for executives in Grade 18, 19 or T6 of the Company
or the Bank. As of the date of this statement, a total of forty-four (44)
executives are eligible to participate in the Retention Plan. An executive's
average annual compensation generally is an amount equal to the average of the
executive's annual cash salary and bonuses and commissions payable for each of
the three (3) full fiscal years ended immediately prior to the termination of
the executive's employment.
If the severance payments otherwise payable under the Retention Plan would
trigger "golden parachute" tax treatment pursuant to Section 280(g) and/or
Section 4999 of the Internal Revenue Code, the executive may elect to either (a)
have the amount of the severance payment reduced to an amount such that no
portion of the payment is subject to such tax treatment or (b) receive the
entire amount of the severance payment and pay the applicable tax. If the
executive elects to receive the entire amount of the severance payment and such
payment triggers golden parachute tax treatment, the Company will not be
entitled to deduct for federal income tax purposes the amount of the payment
which constitutes an excess parachute payment, which amount generally three (3)
times the executive's average annual compensation.
In addition, the Key Employee Retiree Health Plan does provide for the
continuation of benefits under certain circumstances following a change in
control of the Company.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee during 1998 was composed of four of the
Bank's "outside" Directors: Dale E. Hanst, Chairman, Anthony Guntermann, Richard
M. Davis and Harry B. Powell. None of these Directors has ever been employed by
the Company in any position, other than as a Director. Mr. Hanst was Of Counsel
to Reicker, Clough, Pfau & Pyle, LLP which serves as outside corporate and
litigation counsel to the Company and the Bank before his retirement.
No Executive Officer of the Company had any interlocking relationship with any
other for-profit entity during the last fiscal year, including (a) serving on
the compensation committee of any other such entity, or (b) serving as a
Director of any other such entity.
Extent of Participation in the Company's Stock Plans
As of December 31, 1998, the following number of employees/directors of the
Company and/or SBBT or FNBCC were eligible to participate and were participating
in each of the stock plans of the Company:
<TABLE>
<CAPTION>
Number Number
Plan Eligible Participating
---- -------- -------------
<S> <C> <C>
Employee Stock Ownership Plan........................ 988 988
1983 Stock Option Plan............................... 4 4
1992 Restricted Stock Option Plan.................... 247 126
1985 Directors Stock Option Plan..................... 2 2
1996 Directors Stock Option Plan..................... 11 7
Old PCB Plan
-------------
1984 Employee Stock Option Plan...................... 24 14
1994 Employee Stock Option Plan...................... 69 29
1991 Directors Stock Option Plan..................... 17 17
</TABLE>
16
<PAGE>
Securities Subject to Option Plans
The following tables set forth information, as of December 31, 1998 (as adjusted
to reflect subsequent stock splits and stock dividends), regarding options under
the various employee and Director stock option plans of the Company:
<TABLE>
<CAPTION>
1983 Stock Option Plan
Issuance Number of Shares Number of Shares
(Exclusive of Issued Pursuant Subject to Weighted Average Range of
Outstanding to Exercises of Outstanding Exercise Price Expiration
Options) Options Options Per Share Dates
------------- ---------------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C>
-0- 2,402,019 13,196 $ 6.48 06/01/99
to 07/01/99
1984 Stock Option Plan
Issuance Number of Shares Number of Shares
(Exclusive of Issued Pursuant Subject to Weighted Average Range of
Outstanding to Exercises of Outstanding Exercise Price Expiration
Options) Options Options Per Share Dates
----------- ---------------- ---------------- ---------------- ----------
-0- 463,229 13,423 $ 7.20 12/19/99
to 12/14/03
1991 Option Plan
Issuance Number of Shares Number of Shares
(Exclusive of Issued Pursuant Subject to Weighted Average Range of
Outstanding to Exercises of Outstanding Exercise Price Expiration
Options) Options Options Per Share Dates
------------- ---------------- ---------------- ---------------- ----------
231,542 95,235 81,630 $ 6.79 03/01/2002
to 03/01/2002
1992 Restricted Stock Option Plan
Issuance Number of Shares Number of Shares
(Exclusive of Issued Pursuant Subject to Weighted Average Range of
Outstanding to Exercises of Outstanding Exercise Price Expiration
Options) Options Options Per Share Dates
------------- ---------------- ---------------- ----------------- ----------
533,602 1,179,629 886,769 $ 16.18 03/14/99
to 07/01/07
1985 Directors Stock Option Plan
Issuance Number of Shares Number of Shares
(Exclusive of Issued Pursuant Subject to Weighted Average Range of
Outstanding to Exercises of Outstanding Exercise Price Expiration
Options) Options Options Per Share Dates
------------- ---------------- ---------------- ---------------- ----------
-0- 620,467 20,592 $ 8.66 04/20/99
to 07/03/00
17
<PAGE>
1994 Directors Stock Option Plan
Issuance Number of Shares Number of Shares
(Exclusive of Issued Pursuant Subject to Weighted Average Range of
Outstanding to Exercises of Outstanding Exercise Price Expiration
Options) Options Options Per Share Dates
------------- ---------------- ---------------- ---------------- ----------
342,354 352,687 455,087 $ 13.75 09/27/04
to 11/09/08
1996 Directors Stock Option Plan
Issuance Number of Shares Number of Shares
(Exclusive of Issued Pursuant Subject to Weighted Average Range of
Outstanding to Exercises of Outstanding Exercise Price Expiration
Options) Options Options Per Share Dates
------------- ---------------- ---------------- ---------------- ----------
114,039 41,244 144,717 $ 18.45 06/20/01
to 09/11/03
</TABLE>
Compensation of Directors
The Company has a policy of paying non-employee Directors an annual retainer of
$6,000 plus $500 per Board meeting attended and $250 per committee meeting
attended, except for the Executive Committee and the Loan Policy and Review
Committee. Each outside Director who is a member of the Executive Committee is
paid $1,000 per month and each member of the Loan Policy and Review Committee is
paid $400 per meeting. Total Directors' fees paid in 1998 were $216,400.00.
Report of Compensation Committee on Executive Compensation
The Compensation Committee of the Bank is composed of the undersigned
independent outside Directors. The Committee meets after the end of each year to
review the performance of the Bank's Chief Executive Officer and its other
Executive Officers, including those named in the Summary Compensation Table set
forth above, during the just-completed calendar year and to make recommendations
to the Board on executive salaries for the ensuing year and bonuses for the past
year. The Committee met in January, 1998 to make its compensation
recommendations for calendar year 1998 and to recommend bonuses for the Bank's
Executive Officers based on performance in 1997. The Committee makes this report
to the Shareholders so that they may be fully informed as to the factors
utilized by the Committee in making its recommendations to the Board of
Directors concerning compensation levels for the Bank's senior executives for
calendar year 1998 and bonus awards for 1997. The discretionary components of
executive compensation (excluding those benefits which are generally available
to all employees, such as ESOP contributions, insurance, etc.) are salary, bonus
and stock options.
In considering salary levels of the Chief Executive Officer and other Executive
Officers, the Committee's recommendations, while subjective, are intended to be
competitive within the industry to ensure retention of the Bank's high quality
Executive Officers, and to maintain the "team approach" to management of the
Bank. In making these recommendations, the Committee considers the compensation
levels of peer group companies (which are other California independent community
banks) through reference to information available in the industry such as the
State Department of Financial Institutions' Executive Officer Compensation
Survey, the Survey of Executive Compensation of California Independent Banks and
other relevant surveys prepared by industry consultants.
Other components of executive compensation are the bonuses which are awarded to
the Bank's Executive Officers. The bonus recommendations of the Committee are
based upon performance against individual goals as well as the Bank's overall
performance for the period in question as measured by its profitability and its
18
<PAGE>
capital levels. In addition, the Bank's performance relative to the industry in
terms of returns on assets and equity is an important factor. The Committee also
considers the Bank's problem asset levels, its loan production, the quality of
its asset-liability management and its regulatory compliance. The overall value
of the Bank and shareholder equity levels are also important factors considered
by the Committee in making its recommendations. The importance of the Bank's
performance in the setting of bonus and compensation levels is highlighted by
considering the Bank's performance and executive officers' bonuses paid over the
last three years. In 1996, net income was $21,704,000 or $0.90 per share and
executive officers' bonuses were $1,115,000 of which $465,000 was paid in 1996
and the remainder in 1997. In 1997, net income was $30,303,000 or $1.25 per
share and executive officers' bonuses were $1,435,000 of which $630,000 was paid
in 1997 and the remainder in 1998. In 1998 net income was $29,567,000 or $1.21
per share and executive officers' bonuses were $1,600,000 of which $1,470,000
was paid in 1999. A final component of executive compensation is stock options
which are granted from time-to-time to members of the executive group. Stock
options are primarily utilized to provide longer range incentives to the
executives to insure their long-range commitment to the Bank. Grants of stock
options are determined by the Compensation Committee which also acts as the
Stock Option Committee under the Company's stock option plans.
SANTA BARBARA BANK & TRUST
COMPENSATION COMMITTEE
Dale E. Hanst, Committee Chairman
Richard M. Davis, Committee Member
Anthony Guntermann, Committee Member
Harry B. Powell, Committee Member
BALANCE OF PAGE LEFT BLANK INTENTIONALLY
19
<PAGE>
Performance Graph
The following graph compares the yearly percentage change in the Company's
cumulative total shareholder return on its outstanding common stock, stated as
if a $100 initial investment had been made at the beginning of the period,
including reinvestment of dividends, utilizing a measurement period beginning on
December 31, 1993 through December 31, 1998, measured against (i) the Standard &
Poor's 500 Stock Index and (ii) SNL Banks (Western) Index as obtained from SNL
Securities LC.
[Graph Omitted]
<TABLE>
<CAPTION>
Period Ending
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Index 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------------------------------------------------------------------------------------
Pacific Capital Bancorp 100.00 118.49 145.14 210.20 362.68 405.53
S&P 500 100.00 101.32 139.39 171.26 228.42 293.69
SNL Western Bank Index 100.00 99.01 166.03 236.05 347.97 356.54
*Pacific Capital Total Return calculated using dividends and prices supplied in part by the company.
</TABLE>
20
<PAGE>
READOPTION OF ARTICLE FOURTH
OF
THE ARTICLES OF INCORPORATION
CONCERNING FAIR PRICE PROTECTION
(Proposal No. 2)
GENERAL
Shareholders are being asked to readopt Article FOURTH of the Articles
of Incorporation (the "Fair Price Provision"). Article FOURTH is designed to
ensure that shareholders will receive equitable treatment in the event of a
business combination or other significant transaction between the Company and a
shareholder of the Company (or an affiliate of such shareholder) who holds a 10%
or greater stock interest in the Company at the time of the proposed
transaction. The most significant aspects of the Fair Price Provision are: (a)
the Provision requires that certain mergers, acquisitions and other business
combinations be approved by a supermajority shareholder vote or by disinterested
directors unless specified minimum price and procedural requirements are
satisfied in the transaction; and (b) The Provision may be amended only by a
supermajority shareholder vote.
California law requires the renewal every two years of all provisions
in the Articles of Incorporation which contain supermajority vote requirements
and provides that a supermajority vote requirement cannot require the
affirmative vote of more than 66-2/3% of the outstanding shares. The Board of
Directors has unanimously approved and unanimously recommends that the
shareholders readopt the Fair Price Provision. All shareholders are encouraged
to vote in favor of this proposal to maximize the supermajority vote required by
the Fair Price Provision.1
The Board of Directors expects that the Fair Price Provision will
protect the shareholders by making it more difficult to acquire control of the
Company in an unsolicited transaction. The Provision is designed to encourage a
potential acquiror to present any takeover proposal to the Board of Directors
and to negotiate the terms of such proposal with the Board. The Board of
Directors believes that this will increase the probability that all shareholders
will be treated fairly in any such control transaction.
The Fair Price Provision may be characterized as an "anti-takeover"
proposal as the overall effect of the Provision may be to discourage an attempt
to acquire control of the Company. If the Provision is readopted by the
shareholders, it will be more difficult for the holders of a large block of the
Company's Common Stock to acquire the Company in a merger or other transaction
which has not been approved by the Board of Directors. The effect of the
Provision may be to deprive shareholders of an opportunity to sell their shares
at a premium over the market price as takeover bids frequently involve purchases
of stock directly from shareholders at such a premium.
- --------
1 The Proposal states that the supermajority vote will be the
percentage of the shareholders who approve the Provision up to a maximum of 66
2/3%. If 58% of the shareholders approve the Provision the required
supermajority vote a Business Combination will be 58%.
21
<PAGE>
REASONS FOR THE FAIR PRICE PROVISION
A principal reason for the Fair Price Provision is to reduce the
potential for unsolicited proposals for business combinations involving the
Company in which all of the shareholders do not receive consideration of equal
value or the shareholders would receive consideration which the Board of
Directors considers to be less than the fair value of the Company.
In recent years, third parties have increasingly acquired substantial
stock positions in public corporations, including financial institutions, as a
first step in forcing a transaction in which they receive a disproportionate
share of the consideration. This could be accomplished by using their stock
position (a) to force a two-step merger or other business combination in which
certain of the shareholders receive less valuable consideration than other
shareholders, (b) to force the corporation to repurchase the third party's stock
position at a premium, or (c) to force the restructuring of the corporation or
the sale of all or a portion of its assets for less than fair value. Often, such
third parties seek representation on the corporation's board of directors in
order to increase the likelihood that their proposal will be implemented.
Unsolicited attempts to acquire control of a corporation and effect
such a transaction may deprive the shareholders of an adequate opportunity to
evaluate the merits of the proposed transaction. In view of the time pressures
generally involved in such acquisition attempts, shareholders may not have the
opportunity to fully evaluate the proposed transaction or to consider possible
alternative transactions which would provide greater value. Forming a considered
judgment with respect to an acquisition proposal requires an assessment of its
fairness, an analysis of its tax implications to the shareholders and the
corporation, and consideration of the impact of the transaction on the
short-term and long-term prospects of the corporation. It is most important for
the shareholders to have the opportunity to thoroughly evaluate the proposed
transaction and any alternative transactions when the third party would not
acquire all of the stock of the corporation in the initial transaction. In a
two-step acquisition, the third party would control the corporation as a result
of the first step and it would be substantially more difficult for the
shareholders to protect themselves in the second step of the acquisition.
The Fair Price Provision is intended to prevent certain of these
potential inequities in two-step business combinations and to encourage any
person who seeks to acquire control of the Company to consult with the Board of
Directors and to negotiate the terms of the business combination. The Board of
Directors believes that any proposed business combination involving the Company
should be thoroughly studied by the Board to assure that it is in the best
interests of the Company and all of its shareholders and that all of the
shareholders are treated fairly.
The Fair Price Provision presently requires that certain business
combinations be approved by 66-2/3% of the shareholders, unless the proposed
business combination: (a) was approved by the Board of Directors prior to such
party becoming a Ten Percent Stockholder (as that term is defined below); (b)
was approved by the Board of Directors at a meeting at which Interested
Directors (as that term is defined below) did not vote; (c) was approved by the
unanimous vote of the Board of Directors; or (d) complies with certain minimum
price and procedural requirements specified in Article FOURTH. If readopted, the
supermajority shareholder vote requirement will be the percentage equal to the
percentage of shareholders voting in favor of readoption, but not greater than
66-2/3%.
22
<PAGE>
The Fair Price Provision should not prevent or discourage any business
combination in which the acquiring person is prepared to pay the same price to
all of the shareholders.
On the other hand, the Fair Price Provision would discourage business
combination in which the acquiring party pays a premium price in the first step
and a lesser price in the second step. Some shareholders may prefer the
opportunity to receive such a premium price, even if it is for only a portion of
their shares, and therefore consider the Fair Price Provision disadvantageous.
However, because of the substantial risk associated with the second step of the
business combination, the Board of Directors has determined that the Fair Price
Provision is in the best interests of the Company and all of its shareholders.
Readoption of the Fair Price Provision might be deemed to provide a
veto power to substantial shareholders with respect to a business combination
which does not meet the price and procedural requirements and is not approved by
the Board of Directors. The Fair Price Provision requires that such a business
combination must be approved by 66-2/3 of the outstanding voting shares, not
merely 66-2/3 of the shares voting at any shareholder meeting. If the voting
shares represented and voting at the shareholders' meeting is significantly less
than all of the outstanding voting shares, the percentage of the voting shares
that must approve the business combination will be effectively increased and the
ability of a significant minority of the shareholders to block the combination
also will be increased. As of the Record Date, the Company's Employee Stock
Ownership Plan ("ESOP") owned _____% of the outstanding stock of the Company and
was the only shareholder that owned of record more than 5% of the outstanding
stock of the Company.
Shareholders should note that the Fair Price Provision might be deemed
to discourage certain corporate transactions which would result in a change of
the Company's Management, as the Provision has the effect of enhancing
Management's bargaining power in negotiations with an entity attempting to
acquire control of the Company. Management might use such bargaining power not
only to negotiate a favorable price for an acquisition of the Company, but also
to negotiate their retention and more favorable terms for their services.
The Fair Price Provision is not being proposed in response to any
present attempt, known to the Board of Directors, to acquire control of the
Company, to obtain representation on the Board of Directors or to take
significant corporate action. Rather, the Board of Directors believes that the
Fair Price Provision is prudent and in the best interests of the Company and its
shareholders and should be readopted for their continued protection.
Except as described in this Proposal and in Proposal Four in this Proxy
Statement, the Board of Directors does not have any current plans to propose
amendments to the Company's charter documents or take other action which might
be deemed to have an "anti-takeover" effect. Proposal Four discusses the
potential "anti-takeover" effect of the authorization of the undesignated
Preferred Stock and the Board of Directors' consideration of the adoption of a
Shareholders Rights Plan. A Shareholders Rights Plan is an "anti-takeover"
device designed to deter an unsolicited tender offer or proposal for acquisition
of the Company. Shareholders are encouraged to review the discussion of the
effect of the authorization of the Preferred Stock and the adoption of a
Shareholders Rights Plan contained in Proposal Four.
23
<PAGE>
The following description is a summary of the Fair Price Provision,
which constitutes Article FOURTH of the Articles of Incorporation. The text of
Article FOURTH is included in Exhibit "A" hereto and should be read in its
entirety by shareholders.
ANALYSIS OF THE FAIR PRICE PROVISION
a. Definitions. Set forth below are definitions of certain terms included
in the Fair Price Provision.
"Acquiring Party" means any Ten Percent Stockholder proposing
to engage in a Business Combination with the Company or any of its
subsidiaries.
"Business Combinations" covered by the Fair Price Provision
include the following transactions: (a) any merger or consolidation of
the Company with or into (i) any Ten Percent Stockholder or (ii) any
other corporation (whether or not itself a Ten Percent Stockholder)
which, after such merger of consolidation, would be an Affiliate of a
Ten Percent Stockholder; (b) any sale, lease, transfer, mortgage,
pledge or other disposition (in one or a series of related
transactions), whether or not in partial or complete liquidation, of
all of any substantial part of the assets of the Company, or any of its
subsidiaries, to or with any Ten Percent Stockholder or any Affiliate
of a Ten Percent Stockholder; and (c) the issuance or transfer by the
Company, or any of its subsidiaries, of any securities to any Ten
Percent Stockholder or any Affiliate of a Ten Percent Stockholder in
exchange for cash, securities, or other property (or a combination
thereof).
"Disinterested Director" means any director who is not an
Interested Director.
"Interested Director" means any director who is an Affiliate
or Associate of the Acquiring Party, or is nominated, elected or
appointed by or to represent the Acquiring Party. A director shall be
deemed to have been elected by an Acquiring Party if fifty percent
(50%) or more of the votes cast for such director are attributable to
Voting Shares of which the Acquiring Party is the beneficial owner.
"Substantial Part" as used in reference to the assets of the
Company, or any of its subsidiaries, means assets having a value equal
to or greater than one-third (1/3) of the total consolidated assets of
the Company or the subsidiaries as reflected on the Company's most
recent balance sheet.
"Ten Percent Stockholder" means in general as a person who is
the beneficial owner of 10% or more of the outstanding Voting Shares of
the Company. A person will be deemed to own beneficially those shares
held by such person's "Affiliates" and "Associates." These terms
include such person's spouse and other close relatives, as well as
business entities in which the person has a significant ownership or
controlling interest. To the Company's best knowledge, no current
shareholder of the Company is a Ten Percent Stockholder.
24
<PAGE>
"Voting Shares" means stock or other securities of the Company
entitled to vote in the election of directors.
b. Approval of Business Combinations. Under the Fair Price Provision, a
Business Combination may be effected only if, in addition to any Board and
shareholder approval otherwise required by law, it complies with one of the
following requirements.
(i) Certain Minimum Price and Procedural Requirements. If the
Business Combination satisfies certain minimum price and procedural
requirements described below, then it must be approved only by a
majority of the outstanding Voting Shares.
(ii) Board of Directors Approval. The Business Combination was
approved either (1) by the Board of Directors prior to the Acquiring
Party becoming a Ten Percent Shareholder; (2) by the Board of Directors
at a meeting at which Interested Directors did not vote; or (3)
unanimously by the Board of Directors.
(iii) Supermajority Shareholder Approval. If the proposed
Business Combination does not satisfy the conditions of (i) or (ii),
above, then the Business Combination must be approved by supermajority
shareholder vote. Presently, the Fair Price Provision requires a
supermajority vote of 66-2/3% of the Voting Shares. If readopted, the
required supermajority vote will be the lesser of the percentage of
shareholders voting in favor of readoption or 66-2/3%.
c. Minimum Price and Procedural Requirements. Under the Fair Price
Provision, the Acquiring Person may effect the Business Combination without the
approval by the Board of Directors or by the supermajority vote of shareholders
described above, if the Acquiring Person has complied with all of the following
requirements.
(i) Minimum Price. The aggregate amount of the cash and the fair
market value of other consideration to be received per share by holders of
the Common Stock in such proposed Business Combination:
(1) Is not less than the highest per-share price (including
brokerage commissions and/or soliciting dealers' fees) paid by the
Acquiring Party in acquiring any of its holdings or Common Stock; and
(2) Is not less than the earnings per share of the Common Stock
for the four full consecutive fiscal quarters immediately preceding
the record date for the solicitation of votes on such proposed
Business Combination multiplied by the then price/earnings multiple
(if any) of the Acquiring Party.
(ii) Relationship to Market Price. The cash and fair market value of
other consideration to be received per share by holders of the Common Stock
in the proposed Business Combination bears the same or a greater percentage
relationship to the market price of the Common Stock immediately prior to
the announcement of the proposed Business Combination, as the highest per
share price (including brokerage commissions and/or soliciting dealers'
fees) which the Acquiring Party paid for any shares of Common Stock
25
<PAGE>
acquired by it within eighteen (18) months prior to the proposed
Business Combination bears to the market price of the Common Stock
immediately prior to the initial acquisition of any Common Stock by the
Acquiring Party.
(iii) Form of Consideration. The consideration to be received
by holders of Common Stock in the proposed Business Combination shall
be in the same form and of the same kind as the consideration paid by
the Acquiring Party in acquiring the shares of Common Stock already
acquired by it.
(iv) Corporate Structure. After the Acquiring Party has
acquired ownership of ten percent (10%) of the outstanding Voting
Shares ("10% Interest") and prior to the consummation of the proposed
Business Combination:
(1) The Acquiring Party shall have taken steps to
ensure that the Board of Directors includes at all times
representation by Disinterested Directors proportionate to the
ratio that the Voting Shares which from time to time are owned
by persons who are not Ten Percent Stockholders bears to all
outstanding Voting Shares (with a Disinterested Director to
occupy any resulting fractional board position);
(2) There shall have been no reduction in the rate of
dividends payable on the Common Stock except as may have been
unanimously approved by the Board of Directors;
(3) The Acquiring Party shall not have acquired any
newly issued shares of stock, directly or indirectly, from the
Company (except upon conversion of convertible securities
acquired by it prior to becoming a Ten Percent Stockholder or
as the result of a pro rata stock dividend or stock split);
and
(4) The Acquiring Party shall not have acquired any
additional shares of the Company's outstanding Common Stock or
securities convertible into or exchangeable for Common Stock
except as part of the transaction which resulted in the
Acquiring Party acquiring its 10% Interest.
(v) No Special Benefits. Prior to the consummation of the
proposed Business Combination, the Acquiring Party shall not have
received any benefit, directly or indirectly (except proportionately as
a stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or tax credits provided by the Company or made any
major change in the Company's business or equity capital structure
without the unanimous approval of the Board of Directors.
(vi) Proxy Statement. A proxy statement conforming to the
requirements of the Securities Exchange Act of 1934 shall have been
mailed to all holders of Voting Shares for the purpose of soliciting
stockholder approval of the proposed Business Combination. Such proxy
statement shall contain at the front thereof, in a prominent place, any
recommendation as to the advisability (or inadvisability) of the
Business Combination which any director may have furnished in writing,
and an opinion of a reputable investment banking firm selected by
26
<PAGE>
the Disinterested Directors as to the fairness (or lack of fairness) of
the terms of the proposed Business Combination, from the point of view
of the holders of Voting Shares other than any Ten Percent Stockholder.
PROCEDURE FOR AMENDING THE FAIR PRICE PROVISION
Any amendment, change or repeal of the Fair Price Provision or any
other amendment of the Company's Articles of Incorporation which would have the
effect of modifying or permitting circumvention of the Fair Price Provision
requires approval by a supermajority shareholder vote equal to the supermajority
vote required to approve a Business Combination. Presently, the Fair Price
Provision requires approval by at least 66-2/3% of the Voting Shares of the
Company. If readopted, the supermajority vote required to amend the Provision
will be the lesser of the percentage of shareholders voting in favor of
readoption, or 66-2/3%.
Under California law, the Fair Price Provision will be effective only
for a period of two years and must be reapproved or readopted by the
shareholders. It has been more than two years since the Fair Price Provision was
adopted. If the Provision is not readopted, the Provision will not be effective
and any Business Combination otherwise subject to the Provision generally would
have to be approved only by a majority of the Board of Directors and a majority
of the outstanding Voting Shares.
VOTE REQUIRED; BOARD RECOMMENDATION
A favorable vote by the holders of a majority of the Company's
outstanding Common Stock entitled to vote is required to readopt the Fair Price
Provision. If shareholders reapprove the Fair Price Provision, Article FOURTH
will be effective for a period of two (2) years from the date a Certificate of
Amendment is filed with the Secretary of State. The Board of Directors has
instructed Management to refile Article FOURTH to be effective as soon as
possible. Shareholder approval of this Proposal is deemed to authorize any
changes to the text of Article FOURTH as may be required by regulatory agencies.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE FAIR PRICE
PROVISION AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THE PROPOSAL UNLESS A VOTE
AGAINST THE PROPOSAL OR AN ABSTENTION IS SPECIFICALLY INDICATED.
27
<PAGE>
AMENDMENT OF ARTICLES OF INCORPORATION
TO
INCREASE AUTHORIZED COMMON STOCK
(Proposal No. 3)
General
The Company's Articles of Incorporation (the "Articles") currently
authorize 40,000,000 shares of Common Stock ("Common Stock"), no par value, and
no shares of Preferred Stock (the "Preferred Stock"). On February 26, 1999, the
Board of Directors approved an amendment to Article THIRD of the Articles (the
"Amendment") to increase the authorized number of shares of Common Stock by
20,000,000 shares, to a total of 60,000,000 shares and to authorize 1,000,000
shares of Preferred Stock. This proposed Amendment relates only to the increase
in authorized number of shares of Common Stock. Proposal Four in this Proxy
Statement relates to the authorization of the Preferred Stock.
Reasons for the Proposed Amendment
On April 6, 1999, the record date for voting at the Annual Meeting of
Shareholders, an aggregate of _______________ shares of Common Stock were issued
and outstanding and reserved for issuance upon exercise of options outstanding
under the Company's stock option plans. The number of shares of Common Stock
remaining available is not considered adequate for the Company's future possible
requirements.
The Board of Directors believes that it is prudent to increase the
number of authorized shares of Common Stock to the proposed level in order to
provide a reserve of shares available for issuance in connection with possible
future actions. Such actions may include, but are not limited to, stock splits
or stock dividends, financings through the issuance of equity securities,
acquisitions of property or companies for stock, establishing strategic
relationships with corporate partners, distributions of Common Stock under
employee benefit and stock incentive plans and other general corporate purposes.
Currently there are no plans to use the additional shares for any of these
purposes. If the additional authorized Common Stock is available for issuance,
the Company would avoid the delays and expense that would be occasioned by the
necessity of obtaining shareholder approval at the time of the action and would
be better able to engage in these actions.
Possible Effects of the Amendment
If the Amendment is approved, the Board of Directors may cause the
issuance of additional shares of Common Stock without further vote of the
shareholders, except as provided under California law or under the rules of any
securities exchange on which shares of Common Stock are then listed. Current
holders of Common Stock have no preemptive or similar rights, which means that
current shareholders do not have a right to purchase any new issue of shares of
Common Stock in order to maintain their proportionate ownership interests in the
Company. The issuance of any additional shares of Common Stock likely would
dilute the voting power of the outstanding shares of Common Stock and reduce the
28
<PAGE>
portion of the dividends and liquidation proceeds payable to the holders of the
outstanding shares of Common Stock.
It is unlikely that the Board of Directors could use the authorized but
unissued shares of Common Stock as an "anti-takeover" device to create
impediments to a takeover or transfer of control of the Company. However, it is
possible for the Board of Directors to use such additional shares of Common
Stock to establish a limited Shareholders Rights Plan, which is an
"anti-takeover" device. Also Proposals Two and Four describe the potential
"anti-takeover" effect of authorization of the shares of Preferred Stock and the
readoption of the "fair price" provision. Shareholders are encouraged to
consider both of such proposals in approving the increase in the authorized
number of shares of Common Stock.
Required Vote
The affirmative vote of holders of a majority of the outstanding shares
of Common Stock is required to approve the Amendment to the Articles of
Incorporation to increase the authorized number of shares of Common Stock.
The Company's Board of Directors unanimously
recommends a vote "FOR" the Amendment to the Articles
of Incorporation.
29
<PAGE>
AMENDMENT OF ARTICLES OF INCORPORATION
TO
AUTHORIZE PREFERRED STOCK
(Proposal No. 4)
General
The Company's Articles of Incorporation (the "Articles") currently
authorize 40,000,000 shares of Common Stock ("Common Stock"), no par value, and
no shares of Preferred Stock (the "Preferred Stock"). On February 26, 1999, the
Board of Directors unanimously approved an amendment to Article THIRD of the
Articles (the "Amendment") to increase the authorized number of shares of Common
Stock by 20,000,000 shares, to a total of 60,000,000 shares and to authorize
1,000,000 shares of Preferred Stock. This proposal relates only to the
authorization of shares of Preferred Stock. Proposal Three in this Proxy
Statement relates to the authorization of the increase in the authorized number
of shares of Common Stock.
The Amendment would authorize 1,000,000 shares of undesignated
Preferred Stock and would authorize the Board of Directors, without further
shareholder approval, to designate one or more series of Preferred Stock to be
issued from time-to-time and to establish the rights, preferences and privileges
of each such series of Preferred Stock. Such a series of Preferred Stock could
have dividend, voting, liquidation and other rights that are senior to the
rights of the Common Stock. In addition, the Board of Directors might use the
issuance of shares of Preferred Stock as an "anti-takeover" measure to deter an
unsolicited offer or proposal for acquisition of the Company or its stock. The
Company is not aware of any pending or potential offer or proposal for
acquisition of the Company or its stock. The Company has no present plans to
issue any series of Preferred Stock, although the Board of Directors is
investigating the adoption of a Shareholders Rights Plan as a defensive measure
to an unsolicited tender offer or acquisition proposal. (See the description of
the general terms of a Shareholders Rights Plan set forth below.)
Reasons for the Proposed Amendment
On April 6, 1999, the record date for voting at the Annual Meeting of
Shareholders an aggregate of _______________ shares of Common Stock were issued
and outstanding and reserved for issuance upon exercise of options outstanding
under the Company's stock option plans. The number of shares of Common Stock
remaining available is not considered adequate for the Company's future possible
requirements.
The Board of Directors believes that it is prudent to authorize the
shares of Preferred Stock in order to provide a reserve of shares available for
issuance in connection with possible future actions. Such actions may include,
but are not limited to, stock splits or stock dividends, financings through the
issuance of equity securities, acquisitions of property or companies for stock,
establishing strategic relationships with corporate partners, distributions of
stock for general corporate purposes. In addition, the Preferred Stock will
enhance the Company's ability to accomplish any of these actions by giving the
Board of Directors the authority to vary the rights, preferences and privileges
30
<PAGE>
of the security issued by the Company so as to respond to or accomplish
particular concerns. Currently there are no plans to use the Preferred Stock for
any of any particular purposes. If the Preferred Stock is available for
issuance, the Company would avoid the delays and expense that would be
occasioned by having to obtain shareholder approval at the time of the action
and would be better able to engage in these actions.
Possible Effects of the Amendment
If the Amendment is approved, the Board of Directors may cause the
issuance of shares of Preferred Stock without further vote of the shareholders,
except as provided under California law or under the rules of any securities
exchange on which shares of Common Stock are then listed. It is unlikely that
the Preferred Stock will be listed on any securities exchange. Current holders
of Common Stock have no preemptive or similar rights, which means that current
shareholders do not have a right to purchase any new issue of shares of
Preferred Stock in order to maintain their proportionate ownership interests in
the Company. The issuance of any shares of Preferred Stock likely would dilute
the voting power of the outstanding shares of Common Stock and reduce the
portion of the dividends and liquidation proceeds payable to the holders of the
outstanding shares of Common Stock.
The Board of Directors could use the authorized but unissued shares of
Preferred Stock as an "anti-takeover" device to create impediments to a takeover
or acquisition of control of the Company or its stock. Accordingly, the
authorization of the Preferred Stock may deter a future takeover attempt which
holders of the Common Stock may deem to be in their best interests or in which
holders of Common Stock may be offered a premium for their shares over the then
market price for the Common Stock. While the Amendment may be deemed to have
potential anti-takeover effects, the Board of Directors is not aware of any
attempt to take-over or acquire the Company or its stock and the Amendment is
not prompted by any specific take-over or acquisition effort or threat.
The authorization of the Preferred Stock could facilitate the Company's
adoption of a Shareholders Rights Plan, which would constitute an anti-takeover
device. While the Board of Directors has not taken any action to adopt such a
Plan, it is investigating the adoption of such a Plan as a reasonable step to
protect the Company and its shareholders against the threat of a possible
unsolicited tender offer or proposal for the acquisition of the Company or its
stock. Any Shareholders Rights Plan that might be adopted by the Board of
Directors likely would include the following provisions. On adoption of the
Plan, all shareholders would receive, for each share of Common Stock owned by
them, one Right to purchase from the Company a fraction (typically one
one-thousandth) of a share of Preferred Stock. Each fraction of a share of
Preferred Stock issuable upon exercise of a Right would be designed to have a
value equal to the value of one share of Common Stock. The exercise price of a
Right would be greater than the market price of the Common Stock on the date of
the adoption of the Plan. The Rights would not be exercisable until the date on
which a person (the "Acquiring Person") acquires ownership of stock exceeding a
specified level (typically between 10% and 20%) of the outstanding voting stock
of the Company (the "Shares Acquisition Date") or commences a tender offer to
acquire such a stock interest. Until the Shares Acquisition Date, each Right
would be exercisable for a fraction of a share of Preferred Stock. After the
Shares Acquisition Date, each Right would be exercisable for a number of shares
of Common Stock of the Company that has a market value equal to twice the
exercise price of the Right. In addition, the Plan would provide that if the
31
<PAGE>
Company merged with another company or sold its assets after the Shares
Acquisition Date, each Right would be exercisable for a number of shares of
Common Stock of the entity that merged with or acquired the assets of the
Company that has a market value equal to twice the exercise price of the Right.
Generally, any Rights beneficially owned by an Acquiring Person would not be
exercisable for stock of either the Company or the acquiring entity. The Company
would have the right to redeem the Rights at a nominal price at any time prior
to the Shares Acquisition Date or a subsequent date established by the Board of
Directors.
Any Shareholders Rights Plan adopted by the Board of Directors would be
an "anti-takeover" measure, as it would have the effect of potentially
significantly increasing the cost to the acquiring party of an unsolicited
tender offer for or acquisition of the Company or its stock. While such a Plan
would have an anti-takeover effect, it would operate, similarly to the
"fair-price" provision discussed in Proposal Two in this Proxy Statement, as an
incentive for the acquiring party to negotiate an acceptable proposal with the
Board of Directors.
While the Board of Directors is investigating the adoption of a
Shareholders Rights Plan, the Board has not decided to adopt such a Plan or the
terms of such a Plan.
If Proposal Two is approved, the Articles will contain a "fair price"
provision that may be viewed as having anti-takeover effects. Under this
provision the affirmative vote of the holders of up to 66-2/3% of the Company's
outstanding voting power is required to approve certain business transactions
(such as mergers or sales of assets) involving another person or entity that
beneficially owns 10% or more of the voting power of the Company. The Company is
submitting the "fair price" provision for reapproval by the shareholders at the
Meeting. A more detailed description of the "fair price" provision and its
possible anti-takeover effects is set forth under Proposal Two in the Proxy
Statement. The approval of the proposed amendment of Article FOURTH to authorize
the Preferred Stock will not effect the application of the "fair price"
provision.
Required Vote
The affirmative vote of holders of a majority of the outstanding shares
of Common Stock is required to approve the Amendment to the Articles of
Incorporation to authorize the Preferred Stock.
The Company's Board of Directors unanimously
recommends a vote "FOR" the Amendment to the Articles
of Incorporation.
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SELECTION OF INDEPENDENT ACCOUNTANTS
(Proposal No. 5)
The firm of Arthur Andersen, LLP served as independent certified public
accountants for the Company and the Bank with respect to the calendar year 1998,
and has been recommended by the Board to be the Company's and the Bank's
accountants for calendar year 1999. It is expected that one or more
representatives of Arthur Andersen, LLP will be present at the meeting, and will
be given the opportunity to make a statement, if desired, and to respond to all
appropriate questions.
Audit services performed by Arthur Andersen, LLP for the year ended December 31,
1998 consisted of examination of the financial statements of the Company, the
Bank and its employee benefit plans, certain services related to filings with
the Securities and Exchange Commission, and consultation on matters related to
accounting and financial reporting. In addition to these services, Arthur
Andersen, LLP performed certain non-audit services consisting primarily of
consultation on matters relating to the preparation of tax returns, assistance
with regulatory compliance, and assistance with the merger with "old" Pacific
Capital Bancorp, the total fees for which amounted to approximately 72.4% of the
total fees for services paid to Arthur Andersen, LLP for the year ended December
31, 1998. All such services were approved by the Company's Audit Committee,
which has determined the firm of Arthur Andersen, LLP to be fully independent of
the operations of the Company.
Recommendation of the Board of Directors
The Company's Board of Directors recommends that the shareholders approve Arthur
Andersen, LLP to serve as independent certified public accountants for the
Company for the calendar year 1999. The affirmative vote of a majority of the
shares present or represented and entitled to vote at the meeting will be
required to approve this action.
CERTAIN TRANSACTIONS
Some of the Directors of the Company and the companies with which they are
associated are customers of, and have had banking transactions with the Bank in
the ordinary course of the Bank's business, and the Bank expects to have banking
transactions with such persons in the future. In Management's opinion, all loans
and commitments to lend included in such transactions were made in the ordinary
course of the Company's business and in compliance with applicable laws on
substantially the same terms, including interest rates and collateral, as those
prevailing for comparable transactions with other persons of similar
creditworthiness and, in the opinion of Management, did not involve more than a
normal risk of collectability or present other unfavorable features. The
aggregate amount of all such loans and credit extensions outstanding as of
December 31, 1998, to all Directors and Executive Officers, together with their
associates and members of their immediate family, was approximately $3,381,374,
constituting approximately .169% of Company's stockholders' equity. The Company
has a very strong policy regarding review of the adequacy and fairness to the
Bank of loans to its Directors and officers.
Donald M. Anderson, Chairman of the Board and Director of the Company, is a
general partner in Pueblo Associates, from which the Company leases space at
1021 Anacapa Street for its executive headquarters and the housing of
administrative functions of the Bank. The lease, covering 28,957 square feet of
space, was restated in 1994 for a term of five (5) years with four (4) five (5)
year options to renew. The lease payments to Pueblo Associates totaled $512,467
during 1998. In the Company's opinion the lease is comparable to an "arms
length" negotiated lease. On February 20, 1999 a fire occurred at 1021 Anacapa
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Street which required the Company to vacate the premises. Rent is abated under
the terms of the lease. The Company plans to reoccupy the building when it has
been restored.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's Directors and Executive Officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of common stock of the Company. Officers, Directors and
greater than ten-percent stockholders are required by Securities and Exchange
Commission regulation to furnish the Company with copies of all Section 16(a)
forms they file.
To the Company's knowledge, based on review of the copies of such reports
furnished to the Company, written representations that no other reports were
required during the fiscal year ended December 31, 1998 and other information
available to the Company, all Section 16(a) filing requirements applicable to
its officers, Directors and greater than ten-percent beneficial owners were
timely filed.
SHAREHOLDER PROPOSALS
The deadline for shareholders to submit proposals to be considered for inclusion
in the Company's proxy statement for the Company's 2000 Annual Meeting of
Shareholders is November 15, 1999. No such proposals were submitted with respect
to the 1999 Annual Meeting.
OTHER MATTERS
Management does not know of any matters to be presented at the Meeting, other
than those set forth above. However, if other matters come before the Meeting,
it is the intention of the persons named in the accompanying proxy to vote said
proxy in accordance with the recommendations of the Board of Directors of the
Company on such matters, and discretionary authority to do so is included in the
proxy.
FINANCIAL STATEMENTS OF THE COMPANY
Shareholders of the Company are advised that they may, upon request made to the
Company's Head Office located at P.O. Box 1119, Santa Barbara, California 93102,
obtain copies (free of charge) of the Company's Financial Statements or
additional copies of the Company's Annual Report for 1998 by requesting them
from the Secretary of the Company. Pursuant to regulations of the Securities and
Exchange Commission, shareholders of the Company will receive the 1998 Annual
Report of the Company together with this proxy statement. If for any reason any
shareholder does not receive a copy of the 1998 Annual Report of the Company
together with this proxy statement, please advise the Company, and a copy will
be provided promptly.
NOTICE OF AVAILABILITY OF MATERIAL
THE BANK WILL PROVIDE WITHOUT CHARGE TO THE SHAREHOLDERS OF RECORD ON APRIL 6,
1999 (THE RECORD DATE FOR ELIGIBILITY TO VOTE AT THE ANNUAL MEETING) A COPY OF
THE COMPANY'S 1998 FORM 10-K AND ANNUAL REPORT, WHICH WILL BE FILED UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934.
All written requests for this report should be addressed to:
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Dr. Clare McGivney
Vice President
Santa Barbara Bank & Trust
Post Office Box 1119
Santa Barbara, California 93102
SHAREHOLDERS ARE REQUESTED TO VOTE, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED
PROXY WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. A RETURN, SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL
BE APPRECIATED. YOU MAY, WITHOUT AFFECTING ANY VOTE PREVIOUSLY TAKEN, REVOKE
YOUR PROXY BY A LATER PROXY FILED WITH THE SECRETARY OF THE COMPANY OR BY FILING
WRITTEN NOTICE OF REVOCATION WITH THE SECRETARY OF THE COMPANY. ATTENDANCE AT
THE MEETING WILL NOT IN AND OF ITSELF REVOKE A PROXY. IF YOU ATTEND THE MEETING,
YOU MAY REVOKE THE PROXY BY ADVISING THE INSPECTOR OF ELECTIONS THAT YOU ELECT
TO VOTE IN PERSON.
SANTA BARBARA BANCORP
Dated: April __, 1999 By:
----------------------
Donald M. Anderson,
Chairman of the Board
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Exhibit A
FAIR PRICE PROVISION
FOURTH: BUSINESS COMBINATIONS
---------------------
4.1 Definitions. For purposes of this Section 4, the following terms
shall have the meanings set forth below:
4.1.1 "Acquiring Party" shall mean any Ten Percent (10%)
Stockholder (as defined in Section 4.1.11, below) proposing to engage in a
Business Combination with this corporation or a Subsidiary of this Corporation,
4.1.2 "Affiliate" and "Associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General Rules and Regulations,
or any successor Rule, under the Securities Exchange Act of 1934, as then in
effect.
4.1.3 "Beneficial Owner" shall mean:
A. A person or any of its Affiliates or Associates
who directly or indirectly beneficially owns Voting Shares; and
B. A person or any of its Affiliates or Associates
who has the right (1) to acquire (whether such right is exercisable immediately
or only after the passage of time) Voting Shares pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants, or options, or otherwise, or (2) to vote Voting Shares
pursuant to any agreement, arrangement or understanding; and
C. A person or any of its Affiliates or Associates
with which a person described in subparagraphs A or B, above, has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing or any Voting Shares of this Corporation.
4.1.4 "Business Combination" shall mean any of the following
transactions:
A. Any merger or consolidation of this Corporation
or of any Subsidiary of this Corporation, with or into (1) any Ten Percent (10%)
Stockholder or (2) any other corporation (whether or not itself a Ten Percent
(10%) Stockholder) which, after such merger of consolidation, would be an
Affiliate of a Ten Percent (10%) Stockholder; or
B. Any sale, lease, transfer, mortgage, pledge or
other disposition (in one or a series of related transactions), whether or not
in partial or complete liquidation, of all of any substantial part of the assets
of this Corporation or any Subsidiary, to or with any Ten Percent (10%)
Stockholder; or
C. The issuance or transfer by this Corporation or
by any Subsidiary or any securities of this Corporation of any Subsidiary to any
Ten Percent (10%) Stockholder or the Affiliate of a Ten Percent (10%)
Stockholder in exchange for cash, securities, or other property (or a
combination thereof).
4.1.5 "Common Stock" shall mean the Common Stock of this
Corporation or of any Subsidiary of this Corporation involved in a Business
Combination.
4.1.6 Disinterested Director" shall mean any director other
than an Interested Director.
4.1.7 "Interested Director" shall mean any director who is an
Affiliate or Associate of the Acquiring Party, or is nominated, elected or
appointed by or to represent the Acquiring Party; a director shall be deemed to
36
<PAGE>
have been elected by an Acquiring Party if fifty percent (50%) or more of the
votes cast for such director are attributable to Voting Shares of which the
Acquiring Party is held to be the Beneficial Owner.
4.1.8 "Person" shall mean any individual, firm, corporation or
other entity.
4.1.9 "Subsidiary" shall mean any corporation of which a
majority of any class of equity security is owned, directly or indirectly, by
this Corporation; provided, however, that for purposes of the definition of a
Ten Percent (10%) Stockholder set forth in Section 4.1.11, below, the term
"Subsidiary shall mean only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by this Corporation.
4.1.11 "Ten Percent (10%) Stockholder" shall mean, with
respect to any Business Combination, any person (other than this Corporation or
any Subsidiary) which, as of the record date for the determination of
stockholders entitled to notice and to vote on such Business Combination, or
immediately prior to the consummation of any such transaction:
A. Is the Beneficial Owner, directly or indirectly,
of not less than ten percent (10% of the Voting Shares; or
B. Is an Affiliate of this Corporation and at any
time within eighteen (18) months prior thereto was the Beneficial Owner,
directly or indirectly, of not less than ten percent (10%) of the ten
outstanding Voting Shares.
4.1.12 "Unratified Business Combination" shall mean any
Business Combination other than a Business Combination which either:
A. Was set forth in a memorandum of understanding
or other written instrument approved by the Board of Directors prior to the time
the Acquiring Party of an Affiliate of the Acquiring Party became a Ten Percent
(10%) Stockholder;
B. Was approved by the Board of Directors at a duly
held meeting at which Interested Directors were disqualified from voting; or
C. Was approved by the unanimous vote of the entire
Board of Directors.
4.1.13 "Voting Shares" shall mean any of the outstanding
shares of the capital stock of this Corporation entitled to vote generally in
the election of directors. The outstanding Voting Shares shall include shares
deemed to be beneficially owned within the meaning of Section 4.1.3, above, but
shall not include any other Voting Shares which may be issuable pursuant to any
agreement, or upon the exercise of conversion rights, warrants or options, or
otherwise.
4.2 Approval by Shareholders. Any Unratified Business Combination
involving this Corporation or a Subsidiary of this Corporation shall require the
affirmative vote of the holders of at least two-thirds (66.67%) of the
outstanding Voting Shares of this Corporation, considered for the purpose of
this Article FOURTH as one class, notwithstanding that, under applicable law,
some lesser percentage may be specified or no vote may be required,
4.3 Exceptions to Approval Requirements. The provisions of Section 4.2,
above, shall not apply to a proposed Business Combination and any such proposed
Business; Combination shall require only such affirmative vote as is required by
law and any other provision of these Articles of Incorporation, if all of the
following conditions shall have been satisfied:
4.3.1 The aggregate amount of the cash and the fair market
value of other consideration to be received per share by holders of the Common
Stock in such proposed Business Combination:
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<PAGE>
A. is not less than the highest per-share price
(including brokerage commissions and/or soliciting dealers' fees) paid by the
Acquiring Party in acquiring any of its holdings or Common Stock; and
B. Is not less than the earnings per share of the
Common Stock for the four full consecutive fiscal quarters immediately preceding
the record date for the solicitation of votes on such proposed Business
Combination multiplied by the then price/earnings multiple (if any) of the
Acquiring Party as customarily computed and reported in the financial community.
4.3.2 The cash and fair market value of other consideration to
be received per share by holders of the Common Stock in such proposed Business
Combination bears the same or a greater percentage relationship to the market
price of the Common Stock immediately prior to the announcement of the proposed
Business Combination, as the highest per share price (including brokerage
commissions and/or soliciting dealers' fees) which the Acquiring Party paid for
any shares of Common Stock acquired by it within eighteen(18) months prior to
the proposed Business Combination bears to the market price of the Common Stock
immediately prior to the initial acquisition of any Common Stock by the
Acquiring Party.
4.3.3 The consideration to be received by holders of Common
Stock in the proposed Business Combination shall be in the same form and of the
same kind as the consideration paid by the Acquiring Party in acquiring the
shares of Common Stock already acquired by it.
4.3.4 After the Acquiring Party has acquired ownership of not
less than ten percent (10%) of the then outstanding Voting Shares ("10%
Interest") and prior to the consummation of the proposed Business Combination:
A. The Acquiring Party shall have taken steps to
ensure that this Corporation's Board of Directors included at all times
representation by Disinterested Directors (as defined in Section 4.1.6 above)
proportionate to the ratio that the Voting Shares which from time to time are
owned by persons who are not Ten Percent (10%) Stockholders bears to all Voting
Shares outstanding at such respective times (with a Disinterested Director to
occupy any resulting fractional board position);
B. There shall have been no reduction in the rate
of dividends payable on the Common Stock except as may have been approved by the
unanimous vote of the Board of Directors;
C. The Acquiring Party shall not have acquired any
newly issued shares of stock, directly or indirectly, from the Corporation
(except upon conversion of convertible securities acquired by it prior to
becoming a Ten Percent (10% Stockholder or as the result of a pro rata stock
dividend or stock split); and
D. The Acquiring Party shall not have acquired any
additional shares of this Corporation's outstanding Common Stock or securities
convertible into or exchangeable for Common Stock except as a part of the
transaction which resulted in the Acquiring Party acquiring its 10% Interest.
4.3.5 Prior to the consummation of the proposed Business
Combination, the Acquiring Party shall not have received a benefit, directly or
indirectly ) except proportionately as a stockholder) of any loans, advances,
guarantees, pledges or other financial assistance or tax credits provided by
this Corporation or made any major change in this Corporation's business or
equity capital structure without the unanimous approval of the Board of
Directors.
4.3.6 A proxy statement conforming to the requirements of the
Securities Exchange Act of 1934 shall have been mailed to all holders of Voting
Shares for the purpose of soliciting stockholder approval of the proposed
Business Combination. Such proxy statement shall contain at the front thereof,
in a prominent place, any recommendation as to the advisability (or
inadvisability) of the Business Combination which any director may have
furnished in writing, and an opinion of a reputable investment banking firm as
to the fairness (or lack of fairness of the terms of the proposed Business
Combination, from the point of view of the holders of Voting Shares other than
38
<PAGE>
any Ten Percent (10%) Stockholder (such investment banking firm to be (a)
selected by a majority of the directors present at a duly held meeting of the
Board of Directors at which Interested Directors are disqualified from voting on
the selection of the investing banking firm, (b) furnished with all information
it reasonable requests, and (c) a reasonable fee for its services upon receipt
of this Corporation of such opinion).
4.4 Determination by Board. A majority of the directors present at a
duly held meeting of the Board of Directors at which Interested Directors are
disqualified from voting shall have the power and duty to determine for the
purposes of this Article FOURTH on the basis of information known to them, the
following facts:
4.4.1 The number of Voting Shares beneficially owned by any
person;
4.4.2 Whether a person is an Affiliate or Associate of
another person; and
4.4.3 Whether a person has an agreement, arrangement or
understanding with another as to the matters referred to in Paragraph B of
section 4.1.3, above.
4.5 Amendment. The provision of this Article FOURTH may not be altered,
amended or repealed except upon the approval of two-thirds (66.67%) of the
outstanding Voting Shares of this Corporation.
39
<PAGE>
APPENDIX A
PROXY CARD
PACIFIC CAPITAL BANCORP
-----------------------
This Proxy is Solicited on Behalf of the Board of Directors for use
at the Annual Meeting on May 18, 1999.
By signing this proxy, you revoke all prior proxies and appoint Donald M.
Anderson, David W. Spainhour and Jay Donald Smith, and each of them, as Proxy
Holders, each with the power to act separately and to appoint his substitute,
and hereby authorize them to represent and to vote, as designated on the reverse
side, all the shares of common stock of Pacific Capital Bancorp held of record
by the undersigned on April 6, 1999, on the matters shown on the reverse side
and any other matters which may come before the Annual Meeting and all
adjournments.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
+Please detach here+
Please mark your vote as indicated in [X] this example.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees
listed below
INSTRUCTION: To withhold authority to vote for any individual nominee
strike through that nominee's name below.
Nominees: Donald M. Anderson, Edward E. Birch, Richard M. Davis, Dale
E. Hanst, D. Vernon Horton, Roger C. Knopf, Clayton C. Larson, Kathy
J. Odell, William H. Pope, Harry B. Powell, David W. Spainhour,
William S. Thomas Jr.
2. FAIR PRICE PROVISION. To readopt Article FOURTH of the Company's Articles
of Incorporation which require compliance with certain "Fair Price"
provisions in the event of certain business combinations.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. INCREASE AUTHORIZED COMMON STOCK. To amend Article THIRD of the Company's
Articles of Incorporation to increase the authorized number of shares of
Common Stock to 60,000,000 shares:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. AUTHORIZE PREFERRED STOCK. To amend Article THIRD of the Company's Articles
of Incorporation to authorize 1,000,000 shares of undesignated Preferred
Stock:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. SELECTION OF AUDITORS. To approve the selection of Arthur Andersen, LLP to
serve as Independent certified public accountants for the Company for the
1999 calendar year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. OTHER BUSINESS. In their discretion, the proxy holders are authorized to
vote upon such other business as may properly come before the meeting.
This proxy when properly executed and returned will be voted in the manner
directed hereby by the undersigned stockholder. (If no direction is made, this
proxy will be voted FOR Proposals 1, 2, 3, 4 and 5.) If any other business is
presented at the meeting, this Proxy confers authority to and shall be voted in
accordance with the recommendation of the Board of Directors.
Please Mark, Sign, Date and Return this Proxy Card promptly using the Enclosed
Envelope.
------------- ---------------------------------------------
Date Signature
------------- ---------------------------------------------
Date Signature
Please date this Proxy and sign exactly as the name appears
on this card. When shares are held by joint tenants, both
should sign. When signing as attorney, 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.