<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
(Mark One)
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report April 30, 1999
Commission file number 0-25135
REDDING BANCORP
(Exact name of Registrant as specified in its charter)
California 94-2823865
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1951 Churn Creek Road
Redding, Bancorp 96002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (530) 224-3333
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value per share
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date. April 23, 1999: 2,690,103
<PAGE> 2
ITEM 5. OTHER EVENTS.
Redding Bancorp & Subsidiaries held the annual meeting of shareholders on
Tuesday, April 20, 1999 at 5:00pm. The meeting was held pursuant to printed
notice mailed on March 19, 1999 to each shareholder of record on March 1, 1999
that was entitled to vote. A list of shareholders entitled to vote was available
at the Company's headquarters for ten (10) days in advance of the meeting and
was available at the meeting for examination by any shareholder desiring to do
so. All documents concerning the call and notice of the meeting are filed with
the permanent records of the meeting.
Total outstanding shares of Redding Bancorp Common Stock at the time of the
meeting was 2,690,103. The count of shares present immediately prior to the
commencement of the meeting indicated that 2,228,595 shares of the Company's
voting capital stock was present in person or by proxy. These shares represent
82.84% of the outstanding voting stock of the company; therefore a quorum was
present at the meeting.
A copy of the proxy materials are included as Exhibit 1 and attached to this
filing. The following represents the results of the shareholder votes.
PROPOSAL 1 ELECTION OF DIRECTORS
The ballots were counted, and more than a majority of the outstanding voting
stock of the Company has been voted for the election of the eight (8) Directors
named in the proxy statement for the term expiring on the date of the annual
meeting in April 2000. 2,218,278 or 82.46% of the outstanding shares voted for,
10,317 shares voted against and broker non-votes were zero.
PROPOSAL 2 AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING AUTHORIZATION OF
PREFERRED STOCK
More than a majority of the outstanding voting stock of the Company has been
voted for in favor of proposal 2. 1,799,665 or 66.90% of the outstanding shares
voted for, 149,103 voted against and broker non-votes totaled 245,147.
PROPOSAL 3 AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING SUPERMAJORITY
VOTING AND FAIR PRICE PROVISION
More than a majority of the outstanding voting stock of the Company has been
voted for in favor of proposal 3. 1,818,391 or 67.90% of the outstanding shares
voted for, 123,291 voted against and broker non-votes totaled 245,147.
PROPOSAL 4 AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING ACTION BY WRITTEN
CONSENT OF SHAREHOLDERS
More than a majority of the outstanding voting stock of the Company has been
voted for in favor of proposal 4. 1,8135,641 or 68.24% of the outstanding shares
voted for, 104,967 voted against and broker non-votes totaled 245,147.
PROPOSAL 5 AMENDMENT OR ARTICLES OF INCORPORATION CONCERNING LIMITATION OF
DIRECTOR LIABILITY AND INDEMNIFICATION OF AGENTS
More than a majority of the outstanding voting stock of the Company has been
voted for in favor of proposal 5. 1,940,541 or 72.14% of the outstanding shares
voted for, 97,059 voted against and broker non-votes totaled 146,265.
PROPOSAL 6 RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
COMPANY'S INDEPENDENT AUDITORS
More than a majority of the outstanding voting stock of the Company has been
voted for in favor of proposal 6. 2,195,388 or 81.61% of the outstanding shares
voted for, 9,000 voted against and broker non-votes were zero.
A copy of the amended Articles of Incorporation, as Exhibit 2 are attached to
this filing.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 30, 1999 REDDING BANCORP
(Registrant)
/s/ Linda J. Miles
--------------------------------
Linda J. Miles
Executive Vice President &
Chief Financial Officer
<PAGE> 1
EXHIBIT 1 PROXY INFORMATION.
REDDING BANCORP
1951 CHURN CREEK ROAD
REDDING, CALIFORNIA 96002
March 19, 1999
Dear Shareholder:
The Annual Meeting of Shareholders of Redding Bancorp will be held at
5:00 p.m. on April 20, 1999, in the lobby of Redding Bank of Commerce located at
1951 Churn Creek Road, Redding, California, 96002.
The formal notice of the Annual Meeting and the Proxy Statement follows.
A copy of the Redding Bancorp 1998 Annual Report to Shareholders is also
enclosed.
The Proxy Statement outlines the business to be conducted at the
meeting, which in addition to the election of directors and the ratification of
Deloitte & Touche LLP as the Company's independent auditors, includes proposals
to amend and restate the Company's Articles of Incorporation. Your Board of
Directors has approved these proposals and we urge you to vote FOR them.
The full description of the proposals, the reasons for them and their
possible effects are outlined at length in the Proxy Statement. We urge you to
read it carefully. Each proposal to amend and restate the Company's Articles of
Incorporation cannot be completed unless holders of a majority of the
outstanding shares vote in favor of it.
You are cordially invited to attend this year's meeting in person.
However, a form of proxy and pre-addressed envelope are enclosed for your
convenience in voting by proxy. We urge you to express your views by completing
and returning your proxy whether or not you plan to attend the meeting. This
will ensure the voting of your shares if you are unable to attend. If you do not
indicate how you want to vote, your proxy will be counted as a vote in favor of
the proposals. If you fail to return your proxy, you will in effect vote against
the proposals. If you do attend the meeting, you may withdraw your proxy and
vote in person if you choose.
Sincerely,
/s/ Russell L. Duclos
-----------------------------------
Russell L. Duclos
President and
Chief Executive Officer
<PAGE> 2
REDDING BANCORP
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 20, 1999
To the Shareholders of Redding Bancorp:
The Annual Meeting of Shareholders of Redding Bancorp, a California
corporation (the "Company"), will be held at 5:00 p.m. on Tuesday, April 20,
1999, in the lobby of Redding Bank of Commerce located at 1951 Churn Creek Road,
Redding, California, 96002, for the following purposes:
1. Election of Directors. Election of the following eight persons to the Board
of Directors to serve until the 2000 Annual Meeting of Shareholders and
until their successors shall be elected and qualified:
Robert C. Anderson Kenneth R. Gifford, Jr.
Russell L. Duclos Harry L. Grashoff, Jr.
Welton L. Carrel Eugene L. Nichols
John C. Fitzpatrick David H. Scott
2. Amendment of Articles of Incorporation Concerning Authorization of Preferred
Stock. Approval of the amendment and restatement of the Company's Articles
of Incorporation to authorize 2,000,000 shares of preferred stock.
3. Amendment of Articles of Incorporation Concerning Supermajority Voting and
Fair Price Provision. Approval of the amendment and restatement of the
Company's Articles of Incorporation to provide a supermajority voting and
fair price provision for certain business combinations.
4. Amendment of Articles of Incorporation Concerning Action By Written Consent
of Shareholders. Approval of the amendment and restatement of the Company's
Articles of Incorporation to provide that shareholders may act by written
consent in lieu of a meeting only if the Board of Directors has previously
approved such action.
5. Amendment of Articles of Incorporation Concerning Limitation of Director
Liability and Indemnification of Agents. Approval of the amendment and
restatement of the Company's Articles of Incorporation to (i) limit the
liability of a director of the Company to the Company and its shareholders
for monetary damages for breach of the fiduciary duty of care to the fullest
extent permissible under California law and (ii) permit the Company to
indemnify its agents to the fullest extent permissible under California law.
6. Ratification of the Appointment of Independent Auditors. Ratification of the
appointment of Deloitte & Touche LLP as the Company's independent auditors
for the fiscal year ending December 31, 1999.
7. Other Business. Transaction of such other business as may properly come
before the Annual Meeting and any adjournment or postponement thereof.
Shareholders of record as of the close of business on March 1, 1999, are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. A complete list of shareholders entitled to vote will be available at
1951 Churn Creek Road, Redding, California, for ten days before the meeting.
WE URGE YOU TO MARK, SIGN AND DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY
AS POSSIBLE IN THE POSTAGE-PREPAID RETURN ENVELOPE SO THAT, WHETHER YOU INTEND
TO BE PRESENT AT THE ANNUAL MEETING OR NOT, YOUR SHARES CAN BE VOTED. PROXIES
WILL ALSO BE ACCEPTED BY TRANSMISSION OF A TELEGRAM, CABLEGRAM, TELECOPY OR BY
ORAL TELEPHONIC TRANSMISSION PROVIDED SUCH TRANSMISSION CONTAINS SUFFICIENT
INFORMATION FROM WHICH IT CAN BE DETERMINED THAT THE TRANSMISSION WAS AUTHORIZED
BY THE SHAREHOLDER. THE TRANSFER AGENT'S TELECOPY NUMBER IS (415) 989-5241.
RETURNING YOUR PROXY WILL NOT LIMIT YOUR RIGHTS TO ATTEND OR VOTE AT THE ANNUAL
MEETING.
By Order of the Board of Directors,
David H. Scott, Secretary
Redding, California
March 19, 1999
<PAGE> 3
REDDING BANCORP
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Redding Bancorp, a California corporation, of proxies
in the accompanying form to be used at the Annual Meeting of Shareholders to be
held at 5:00 p.m. on Tuesday, April 20, 1999, at 1951 Churn Creek Road, Redding,
California and any adjournment thereof (the "Annual Meeting"). The Company's
principal executive offices are located at 1951 Churn Creek Road, Redding,
California, 96002. Unless otherwise indicated, all references herein to the
"Company" refer to Redding Bancorp, a California corporation, and/or its
subsidiaries.
The shares represented by the proxies received in response to this
solicitation and not revoked will be voted at the Annual Meeting in accordance
with the instructions contained therein. A proxy may be revoked at any time
before it is exercised by filing with the Secretary of the Company a written
revocation or a duly executed proxy bearing a later date or by voting in person
at the Annual Meeting. If no choice is specified in a returned proxy, the shares
will be voted (i) FOR the election of the nominees for director listed in this
Proxy Statement, (ii) FOR the approval of the proposal to amend and restate the
Company's Articles of Incorporation to authorize 2,000,000 shares of preferred
stock, (iii) FOR the approval of the proposal to amend and restate the Company's
Articles of Incorporation to provide a supermajority voting and fair price
provision for the approval of certain business combinations, (iv) FOR the
approval of the proposal to amend and restate the Company's Articles of
Incorporation to provide that shareholders may act by written consent in lieu of
a meeting only if the Board of Directors has previously approved such action,
(v) FOR the approval of the proposal to amend and restate the Company's Articles
of Incorporation to (A) limit the liability of a director of the Company to the
Company or its shareholders for monetary damages for breach of the fiduciary
duty of care to the fullest extent permissible under California law and (B)
permit the Company to indemnify its agents to the fullest extent permissible
under California law and (vi) FOR the ratification of the appointment of
Deloitte & Touche LLP as the Company's independent auditors for the fiscal year
ending December 31, 1999, as described in the Notice of Annual Meeting and in
this Proxy Statement and, as to any other matter that may be properly brought
before the Annual Meeting, in accordance with the judgment of the proxy holders.
Shareholders of record at the close of business on March 1, 1999 (the
"Record Date"), are entitled to notice of and to vote at the Annual Meeting. As
of the close of business on the Record Date, the Company had 2,690,103 shares of
Common Stock outstanding and entitled to vote. The presence in person or by
proxy of the holders of a majority of the Company's outstanding shares of Common
Stock ("Common Stock") constitutes a quorum for the transaction of business at
the Annual Meeting.
Each holder of Common Stock is entitled to one vote for each share held
as of the Record Date, except that in the election of directors, under
California law, each shareholder may be eligible to exercise cumulative voting
rights and may be entitled to as many votes as shall equal the number of shares
of Common Stock held by such shareholder multiplied by the number of directors
to be elected, and such shareholder may cast all of such votes for a single
nominee or may distribute them among two or more nominees. No shareholder,
however, shall be entitled to cumulate votes (in other words, cast for any
candidate a number of votes greater than the number of shares of Common Stock
held by such shareholder multiplied by the number of directors to be elected)
unless the name(s) of the candidate(s) has (have) been placed in nomination
prior to the voting and a shareholder has given notice at the meeting of the
shareholder's intention to cumulate such shareholder's votes. If any one
shareholder has given notice, all shareholders may cumulate their votes for
candidates in nomination. The candidates receiving the highest number of
affirmative votes of shares entitled to be voted for them, up to the number of
directors to be elected by such shares, shall be elected.
1
<PAGE> 4
The expense of printing and mailing proxy materials will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation may be
made by certain directors, officers and other employees of the Company by
personal interview, telephone or facsimile. No additional compensation will be
paid to such persons for such solicitation. The Company will reimburse brokerage
firms and others for their reasonable expenses in forwarding solicitation
materials to beneficial owners of the Company's Common Stock.
This Proxy Statement and the accompanying form of proxy are being mailed
to shareholders on or about March 19, 1999.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting it will be proposed to elect eight directors, each
to hold office until the next Annual Meeting and until successors shall be
elected and qualified. It is the intention of the proxy holders named in the
enclosed Proxy to vote such Proxies (except those containing contrary
instructions) for the eight nominees named below.
The Board does not anticipate that any of the nominees will be unable to
serve as a director, but if that should occur before the Meeting, the proxy
holders reserve the right to substitute as nominee and vote for another person
of their choice in the place and stead of any nominee unable so to serve. The
proxy holders also reserve the right, if a shareholder properly exercises his or
her right to cumulate votes, to cumulate votes for the election of directors and
cast all of such votes for any one or more of the nominees, to the exclusion of
others, and in such order of preference as the proxy holders may determine in
their discretion, based upon the recommendation of the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
EIGHT NOMINEES FOR DIRECTOR.
Brief summaries of the background and business experience of each of the
nominees covering at least the last five years follow:
Robert C. Anderson, age 66, has served as Chairman of the Board of the
Company since the Company's incorporation in January 1982 and is a member of the
loan, marketing, executive compensation, asset/liability, audit, long range
planning and executive committees of the Board. Mr. Anderson is the mayor of the
City of Redding and is a member of the Redding City Council.
Russell L. Duclos, age 59, has served as President, Chief Executive
Officer and a director of the Company since July 1997. From 1982 to July 1997,
he served as Chief Credit Officer of the Company. Mr. Duclos presently serves on
the asset/liability, executive, loan, marketing and long range planning
committees of the Board of Directors.
Welton L. Carrel, age 61, has served as a director of the Company since
January 1982. Mr. Carrel is retired. From 1961 to 1989, he was President of
Western Business Equipment d.b.a. Carrel's Office Machines. Mr. Carrel is a
member of the audit, loan and marketing committees of the Board of Directors.
John C. Fitzpatrick, age 63, has been a director of the Company since
January 1982. Mr. Fitzpatrick has served as President and Chief Executive
Officer of Pepsi Cola Bottling Company of Northern California since 1986 and
Chief Executive Officer of Carbonated Industries since its inception in 1986.
From 1962 to 1985, Mr. Fitzpatrick was President and Chief Executive Officer of
McCall's Dairy Milk and Ice Cream. Mr. Fitzpatrick also serves as Secretary of
John Fitzpatrick & Sons, Inc., a company engaged in the real estate investment
business. Mr. Fitzpatrick serves as chairman of the long range planning
committee and is a member of the executive, executive compensation, marketing
and audit committees of the Board of Directors.
2
<PAGE> 5
Kenneth R. Gifford, Jr., age 53, has served as a director of the Company
since January 1998. Mr. Gifford has been a director, President and Chief
Executive Officer of Gifford Construction, Inc. since 1972. Mr. Gifford serves
as chairman of the marketing committee and is a member of the audit, executive
compensation and long range planning committees of the Board of Directors.
Harry L. Grashoff, Jr., age 63, has served as a director of the Company
since January 1982. Mr. Grashoff is retired. From 1982 to July 1997, Mr.
Grashoff was President and Chief Executive Officer of the Company. Mr. Grashoff
serves as chairman of the loan committee and is a member of the executive, long
range planning, asset/liability and marketing committees of the Board of
Directors.
Eugene L. Nichols, age 64, has been a director of the Company since
January 1982. He is a General Partner and Chief Executive Officer of Nichols,
Melburg and Rossetto and Associates, an architectural firm, a position he has
held since 1981. Mr. Nichols serves on the audit, long range planning and
marketing committees of the Board of Directors.
David H. Scott, age 55, has been a director of the Company since April
1997. He is Managing Partner of D. H. Scott & Company, a public accounting firm,
a position he has held since 1986. Mr. Scott serves as chairman of the audit and
asset/liability committees and is a member of the executive compensation and
loan committees of the Board of Directors.
None of the directors were selected pursuant to arrangements or
understandings other than with the directors and shareholders of the Company
acting within their capacity as such. There are no family relationships between
any of the directors, and none of the directors serve as a director of any other
company which has a class of securities registered under, or subject to periodic
reporting requirements of, the Securities Exchange Act of 1934, as amended, or
any company registered as an investment company under the Investment Company Act
of 1940.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a standing Loan Committee, Executive
Committee, Asset/Liability Committee, Marketing Committee, Long Range Planning
Committee, Executive Compensation Committee and Audit Committee. The Board has
not appointed a Nominating Committee. The Executive Compensation Committee and
Audit Committee are comprised entirely of independent directors.
Executive Committee
The members of the Executive Committee during 1998 were Robert C.
Anderson, Russell L. Duclos, John C. Fitzpatrick, Richard W. Green and Harry L.
Grashoff, Jr. The Executive Committee held 12 meetings during 1998. The
Executive Committee's functions are to review and discuss all current and
pending strategic actions of the Company.
Loan Committee
The members of the Loan Committee during 1998 were Robert C. Anderson,
Russell L. Duclos, Harry L. Grashoff, Jr., Richard W. Green, Charles E. Metro
and David H. Scott. The Loan Committee held 52 meetings during 1998. The Loan
Committee's functions are to establish credit policy, monitor portfolio quality,
review and approve credits, establish lending limits and monitor the Company's
reserve allowance.
Long Range Planning Committee
The members of the Long Range Planning Committee during 1998 were Robert
C. Anderson, Russell L. Duclos, Welton L. Carrel, John C. Fitzpatrick, Richard
W. Green, Kenneth R. Gifford, Jr., Harry L. Grashoff, Jr., Charles E. Metro and
Eugene L. Nichols. The Long Range Planning Committee held three meetings during
1998. The Long Range Planning Committee's functions are to establish short and
long term strategic goals for the Company and approve operating budgets.
3
<PAGE> 6
Asset/Liability Committee
The members of the Asset/Liability Committee during 1998 were Robert C.
Anderson, Russell L. Duclos, Welton L. Carrel, Harry L. Grashoff, Jr. and David
H. Scott. The Asset/Liability Committee held two meetings during 1998. The
Asset/Liability Committee's functions are to establish investment policy,
monitor mix and maturity of the loan and investment portfolios and monitor
exposure to interest rate risk.
Executive Compensation Committee
The members of the Executive Compensation Committee during 1998 were
Robert C. Anderson, John C. Fitzpatrick, Kenneth R. Gifford, Jr., Richard W.
Green and David H. Scott. The Executive Compensation Committee held five
meetings during 1998. The Executive Compensation Committee's functions are to
administer the Company's compensation programs and policies applicable to its
executive officers. The Executive Compensation Committee meets annually to
review and reestablish the salaries of the Company's executive officers, to
propose adjustments to the incentive compensation bonus program. The Executive
Compensation Committee also administers the 1998 Stock Option Plan.
Marketing Committee
The members of the Marketing Committee during 1998 were Richard W.
Green, Robert C. Anderson, Russell L. Duclos, Welton L. Carrel, John C.
Fitzpatrick, Kenneth R. Gifford, Jr., Harry L. Grashoff, Jr. and Eugene L.
Nichols. The Marketing Committee held six meetings during 1998. The Marketing
Committee's functions are to develop the Company's marketing plan in accordance
with the Company's strategic plans and to approve the Company's marketing
budget.
Audit Committee
The members of the Audit Committee during 1998 were Robert C. Anderson,
Welton L. Carrel, John C. Fitzpatrick, Kenneth R. Gifford, Jr., Eugene L.
Nichols and David H. Scott. The Audit Committee held five meetings during 1998.
The Audit Committee's functions are to oversee the Company's relationship with
its independent accounting firm, to review the recommendations of such
accounting firm, to determine whether the recommendations of the accounting firm
are being implemented and to oversee the internal audit function of the Company.
BOARD OF DIRECTORS MEETINGS
The Board of Directors held 12 meetings during the year ended December
31, 1998. All directors attended at least 95% of the aggregate number of
meetings of the Board of Directors and of the committees on which such directors
serve.
DIRECTORS' COMPENSATION
Each outside director of the Company receives $850 for each Board of
Directors meeting attended, $500 for each meeting not attended, $250 for each
loan and audit committee meeting attended and $200 for all other committee
meeting attended. Committee chairmen are paid an additional $50 per meeting. The
Chairman of the Board is paid an additional $700 per month, regardless of the
number of meetings attended. Directors are also eligible to participate in the
1998 Stock Option Plan, as determined by the Executive Compensation Committee.
In April 1998, options to purchase shares of the Company's Common Stock
were granted to each of the Company's directors as follows: Robert C. Anderson:
45,000 shares, Welton L. Carrel: 27,000 shares, John C. Fitzpatrick: 37,500
shares, Kenneth R. Gifford, Jr.: 18,000 shares, Harry L. Grashoff, Jr.: 37,500
shares, Richard W. Green: 33,000 shares, Charles E. Metro: 27,000 shares, Eugene
L. Nichols: 25,500 shares and David H. Scott: 19,500 shares. The options were
granted at an exercise price of $9.07, which represented 85% of the fair market
value of the Common Stock on the date of grant as determined by the Board of
Directors. The options vest at the rate of 20% per year commencing on April 22,
1999.
4
<PAGE> 7
Under the terms of the 1998 Stock Option Plan, vesting of the options is
accelerated in the event of a change of control (as defined in the 1998 Stock
Option Plan), termination of employment by reason of death or disability,
termination of employment by the Company without cause or, in the case of an
outside director, mandatory retirement. On March 1, 1999, Richard W. Green will
retire, resulting in the vesting of 100% of his options as of that date.
See "Employment Agreements" for a description of the compensation
arrangement with Russell L. Duclos, an officer of the Company who is also a
director.
5
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 1, 1999 by (i) each person
who is known by the Company to beneficially own more than five percent of the
Company's Common Stock, (ii) each of the Company's directors, (iii) each of the
Named Executive Officers (as defined on page 8) and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares of
Common Stock
Name and Address of Beneficial Owner Beneficially Owned(1) Percent
- ------------------------------------ --------------------- -------
<S> <C> <C>
Gilbert and Irene Goetz
P. O. Box 493130
Redding, CA 96049........................ 150,240 5.58
Robert C. Anderson(2)
1951 Churn Creek Road
Redding, CA 96002........................ 153,600 5.71
John C. Fitzpatrick(3)
1951 Churn Creek Road
Redding, CA 96002........................ 178,170 6.62
Harry L. Grashoff, Jr.(4)
1951 Churn Creek Road
Redding, CA 96002........................ 149,720 5.57
Welton L. Carrel(5)....................... 82,440 3.06
Russell L. Duclos(6)...................... 23,082 *
Kenneth R. Gifford, Jr.(7)................ 28,457 1.06
Charles E. Metro(8)....................... 93,000 3.46
Eugene L. Nichols(9)...................... 43,074 1.60
David H. Scott(10)........................ 14,400 *
Linda J. Miles(11)........................ 4,500 *
Michael C. Mayer(12)...................... 5,500 *
All directors and executive officers as a
group (11 persons)........................ 775,943 28.8
</TABLE>
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of March 1, 1999, are deemed to
be beneficially owned by the person holding such option for the purpose of
computing the percentage ownership of such person but are not treated as
outstanding for the purposes of computing the percentage ownership of any
other person. Except as indicated by footnotes and subject to community
property laws, where applicable, the persons named above have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Includes 144,600 shares held by the Anderson Family Revocable Living Trust,
of which Mr. Anderson is a co-trustee and shares voting and investment
power with respect to such shares, and 9,000 shares issuable to Mr.
Anderson upon the exercise of options exercisable within 60 days of
March 1, 1999.
(3) Includes 119,010 shares held by Pepsi Cola Bottling Company of Northern
California, a California limited partnership ("Pepsi"), 51,660 shares owned
by the Pepsi Profit Sharing Plan (the "Pepsi Plan") and 7,500 shares
issuable to Mr. Fitzpatrick upon the exercise of options exercisable within
60 days of March 1, 1999. Mr. Fitzpatrick is chief executive officer of
Carbonated Industries, Inc., the general partner of Pepsi, and may be
deemed to share voting and investment power with respect to such shares.
Mr. Fitzpatrick is a participant in the Pepsi Plan. Mr. Fitzpatrick
disclaims beneficial ownership of such shares except for those shares in
which he has a pecuniary interest.
6
<PAGE> 9
(4) Includes 129,720 shares held jointly with Mr. Grashoff's spouse, 5,640
shares held separately in his spouse's name and 7,500 shares issuable to
Mr. Grashoff upon the exercise of options exercisable within 60 days of
March 1, 1999.
(5) Includes 76,860 shares held by the Carrel Family Living Trust of which Mr.
Carrel is a co-trustee and shares voting and investment power with respect
to such shares, 180 shares held in Mr. Carrel's spouse's name for their
grandchildren and 5,400 shares issuable to Mr. Carrel upon the exercise of
options exercisable within 60 days of March 1, 1999.
(6) Includes 17,082 shares held jointly with Mr. Duclos' spouse and 6,000
shares issuable to Mr. Duclos upon the exercise of options exercisable
within 60 days of March 1, 1999.
(7) Includes 24,857 shares held jointly with Mr. Gifford's spouse and 3,600
shares issuable to Mr. Gifford upon the exercise of options exercisable
within 60 days of March 1, 1999.
(8) Includes 47,250 shares held by the Charles E. Metro Investment Co. Profit
Sharing Plan, of which Mr. Metro is a trustee and shares voting and
investment power with respect to such shares, and 27,000 shares issuable to
Mr. Metro upon the exercise of options exercisable within 60 days of March
1, 1999.
(9) Includes 1,500 shares held jointly with Mr. Nichols' spouse, 1,098 shares
held separately in his spouse's name and 5,100 shares issuable to Mr.
Nichols upon the exercise of options exercisable within 60 days of March 1,
1999.
(10) Includes 1,645 shares held by the David H. Scott Accountancy Corporation
401(k) Plan, of which Mr. Scott is a trustee and shares voting and
investment power with respect to such shares, 8,855 shares held jointly
with Mr. Scott's spouse and 3,900 shares issuable to Mr. Scott upon the
exercise of options exercisable within 60 days of March 1, 1999.
(11) Consists of 4,500 shares issuable to Ms. Miles upon the exercise of options
exercisable within 60 days of March 1, 1999.
(12) Includes 4,500 shares issuable to Mr. Mayer upon the exercise of options
exercisable within 60 days of March 1, 1999.
7
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain summary information concerning
compensation paid to the Company's Chief Executive Officer and two other
officers who were serving as executive officers on December 31, 1998, and whose
aggregate salary and bonus exceeded $100,000 in fiscal 1998 (the "Named
Executive Officers") and for each of the fiscal years ended December 31, 1997
and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------- ------------
Securities All Other
Other Underlying Compensa-
Name and Principal Position Year Salary($) Bonus($) ($)(3) Options(#) tion($)(4)
- --------------------------- ---- --------- -------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Russell L. Duclos 1998 $202,202(1) $47,421 $5,000 30,000 $3,378
President and Chief 1997 $100,000(2) $80,000 $5,000 -- $2,342
Executive Officer 1996 $ 77,500 $62,500 $5,000 -- $2,342
Linda J. Miles 1998 $166,459 $38,942 $5,000 22,500 $3,660
Executive Vice President 1997 $ 80,000 $70,000 $5,000 -- $2,342
and Chief Financial Officer 1996 $ 72,500 $62,500 $5,000 -- $2,342
Michael C. Mayer(5) 1998 $146,890 $38,246 $5,000 22,500 $3,584
Executive Vice President 1997 $ 50,000 $26,250 $5,000 -- $1,171
and Chief Credit Officer
</TABLE>
- ---------------------
(1) Includes $64,265 deferred by Mr. Duclos pursuant to the Company's Deferred
Compensation Plan.
(2) Includes $15,400 deferred by Mr. Duclos pursuant to the Company's Deferred
Compensation Plan.
(3) Represents an automobile for business use, for which the Company pays all
expenses, and membership expenses in connection with the use of a private
club for business purposes, particularly for the purpose of entertaining
the Bank's customers. The officers may have derived some personal benefit
from the use of such automobiles and membership. The Company, after
reasonable inquiry, believes that the value of any personal benefit not
directly related to job performance which is derived from the personal use
of such automobile and membership does not exceed $5,000 per year in the
aggregate for any single executive officer.
(4) Represents health insurance premiums paid by the Company.
(5) Mr. Mayer joined the Company in April 1997.
8
<PAGE> 11
STOCK OPTIONS
The following tables summarize option grants to the Named Executive Officers
during fiscal 1998, and the value of the options held by each such person at the
end of fiscal 1998. No options were exercised by the Named Executive Officers
during the fiscal year ended December 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential
------------------------------------ Realizable Value at
Number of Percentage of Assumed Annual Rates of
Securities Total Options Stock Price Appreciation
Underlying Granted to Exercise for Option Term(4)
Options Employees in Price Expiration ------------------------
Name Granted(#)(1) Fiscal Year ($/Sh)(2) Date(3) 5%($) 10%($)
- ---- ------------- ----------- --------- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Russell L. Duclos... 30,000 21% $10.67 04/22/08 $199,200 $508,200
Linda J. Miles...... 22,500 16% $10.67 04/22/08 $149,400 $381,150
Michael C. Mayer.... 22,500 16% $10.67 04/22/08 $149,400 $381,150
</TABLE>
- ------------
(1) The right to exercise these stock options vests on an annual basis over a
five-year period. Under the terms of the Company's stock plans, the
committee designated by the Board of Directors to administer such plans
retains the discretion, subject to certain limitations, to modify, extend
or renew outstanding options and to reprice outstanding options. Options
may be repriced by canceling outstanding options and reissuing new options
with an exercise price equal to the fair market value on the date of
reissue, which may be lower than the original exercise price of such
canceled options.
(2) The exercise price is equal to 100% of the fair market value on the date of
grant as determined by the Board of Directors.
(3) The options have a term of ten years, subject to earlier termination in
certain events related to termination of employment.
(4) The five percent and ten percent assumed rates of appreciation are
suggested by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the future price of the
Common Stock. No assurance can be given that any of the values reflected in
the table will be achieved.
9
<PAGE> 12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Securities Underlying Value of
Unexercised Unexercised
Options at In-the-Money Options at
December 31, 1998(#) December 31, 1998($)(1)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Russell L. Duclos..... -- 30,000 -- $204,900
Linda J. Miles........ -- 22,500 -- $153,675
Michael C. Mayer...... -- 22,500 -- $153,675
</TABLE>
- ------------
(1) Based on the fair market value of the Company's Common Stock at December
31, 1998 of $17.50 per share less the applicable exercise price per share.
The fair market value of the Company's Common Stock at December 31, 1998
was determined on the basis of the last reported sale of the Company's
Common Stock in 1998, which occurred on December 1, 1998.
1998 STOCK OPTION PLAN
On February 17, 1998, the Board of Directors adopted the 1998 Stock Option
Plan (the "Plan"), which was approved by the Company's shareholders on April 21,
1998. The Plan provides for awards in the form of options (which may constitute
incentive stock options ("Incentive Options") under Section 422(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory stock
options ("NSOs")) to key personnel of the Company, including the directors of
the Company or any subsidiary. The Plan is not qualified under section 401(a) of
the Code or subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended. The Plan provides that Incentive Options under the Plan
may not be granted at less than 100% of fair market value of the Company's
Common Stock on the date of the grant, which means the recipient receives no
benefit unless the Company's Common Stock price increases over the option term.
Under the terms of the Plan, NSOs may not be granted at less than 85% of the
fair market value of the Common Stock on the date of the grant. The purpose of
the Plan is to promote the long-term success of the Company and the creation of
shareholder value by (i) encouraging key personnel to focus on critical long
range objectives, (ii) increasing the ability of the Company to attract and
retain key personnel and (iii) linking key personnel directly to shareholder
interests through increased stock ownership. A total of 540,000 shares of the
Company's Common Stock are available for grant under the Plan. If an option
granted under the Plan expires, is canceled, forfeited or terminates without
having been fully exercised, the unpurchased shares which were subject to that
option again become available for the grant of additional options under the
Plan.
The Plan is administered by the Executive Compensation Committee of the
Board of Directors. Subject to the terms of the Plan, the Executive Compensation
Committee determines the number of options in the award as well as the vesting
and all other conditions. The Plan provides that all options under the Plan
shall vest at a rate of at least 20% per year from the date of the grant.
Vesting may be accelerated in the event of an optionee's death, disability, or
retirement, or in the event of a change in control (as defined in the 1998 Stock
Option Plan). As of March 1, 1999, the Company had outstanding options to
purchase an aggregate of 411,000 shares of the Company's Common Stock at
exercises prices ranging from $9.07 to $10.67 per share or a weighted average
exercise price per share of $9.62.
10
<PAGE> 13
DIRECTORS DEFERRED COMPENSATION PLAN
Effective January 1993, the Board of Directors adopted the Directors
Deferred Compensation Plan (the "Deferred Compensation Plan") pursuant to which
each director of the Company may elect to defer all or any part of the
compensation to which such director would be entitled as a director such as
director's fees or committee fees. An election to defer compensation continues
in effect until revoked and deferred compensation, together with interest
thereon, is payable to the director or his or her beneficiary within 30 days
after the date of death or resignation unless the director has designated an
optional installment method of payment over a period of up to ten years.
Pursuant to the Deferred Compensation Plan, each director may designate one or
more beneficiaries to receive amounts due such director upon such director's
death. Interest on amounts deferred is credited on a monthly basis and
compounded at a rate equal to one half percent above the Company's reference
rate in effect on July 1 of each year. If the Company changes the method of
computing its reference rate, then the Deferred Compensation Plan provides that
the Company's reference rate will be replaced by the prime rate published in the
West Coast edition of the Wall Street Journal. The Deferred Compensation Plan
may be terminated by the Company at any time with respect to compensation earned
on or after the termination date.
PENSION AND LONG-TERM INCENTIVE PLANS
The Board of Directors of the Company adopted an Incentive Profit Sharing
Plan in July 1983, which will remain in effect until terminated by the Board of
Directors. The Incentive Profit Sharing Plan provides that bonuses are computed
on the Company's profits after a 20% return to shareholders, before taxes, less
any gain on investment securities plus any loss on investment securities sold.
The bonus is paid on the first day of each calendar quarter as to 70% of the
bonus earned for the previous calendar quarter. Upon receipt of the audited
annual statement, the incentive bonus is adjusted and the remainder of the bonus
earned, if any, is paid to the recipients thereof.
The participants in the Incentive Profit Sharing Plan are the Company's
President and Chief Executive Officer, Russell L. Duclos, as to three and five
hundredths percent of the profits as defined above; Michael C. Mayer, Executive
Vice President and Chief Credit Officer, as to two and forty-five hundredths
percent of such profits; and Linda J. Miles, Executive Vice President and Chief
Financial Officer as to two and fifty-five hundredths percent of such profits.
The remainder of the Company's employees may receive up to 12% of the profits at
the discretion of the President of the Company.
EMPLOYMENT AGREEMENTS
In June 1997, the Company entered into an employment agreement with Russell
L. Duclos, the President and Chief Executive Officer of the Company. The
agreement may be terminated by either the Company or Mr. Duclos, with or without
cause or notice. Unless sooner terminated, the agreement shall automatically
terminate on June 30, 2000. Pursuant to the agreement, Mr. Duclos' initial base
salary was $100,000 per year and is reviewed and adjusted annually. The
agreement also provides that Mr. Duclos shall be eligible to receive profit
sharing compensation pursuant to the Company's Incentive Profit Sharing Plan.
The Company has further agreed to provide Mr. Duclos with the following
additional benefits: (i) an automobile and payment of all necessary and
customary expenses therefor, (ii) a proprietary membership and monthly dues in
the Riverview Country Club for use by Mr. Duclos for business development and
(iii) an annual paid vacation of four weeks. In the event Mr. Duclos is
terminated by the Company for a reason other than cause, the Company is
obligated to pay Mr. Duclos an amount equal to twice his then annual base
salary, which amount is required to be paid over a period of one year.
INDEMNIFICATION MATTERS
The Company's bylaws provide for indemnification of the Company's directors,
officers, employees and other agents of the Company to the extent and under the
circumstances permitted by the California General Corporation Law. The Company's
bylaws also provide that the Company shall have the power to purchase and
maintain insurance covering its directors, officers and employees against any
liability asserted against any of them and incurred by any of them, whether or
not the Company would have the power to indemnify them against such liability
under the provisions of applicable law or the provisions of the Company's
bylaws.
11
<PAGE> 14
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to provisions in the Company's bylaws, the Company has been
informed that, in the opinion of the Securities and Exchange Commission (the
"SEC"), such indemnification is against public policy as expressed in the
Securities Act of 1933, and is therefore unenforceable.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), 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 SEC initial reports of ownership and reports
of changes of ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent shareholders of the
Company became subject to the requirements of Section 16(a) and the SEC
regulations thereunder on February 2, 1999, the effective date of the Company's
Registration Statement on Form 10 under the Exchange Act. Accordingly, no
director, officer or beneficial owner of more than ten percent of the Company's
Common Stock was required to file reports pursuant to Section 16(a) of the
Exchange Act in 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation Committee of the Board of Directors consists of
five directors, none of whom is an officer or employee of the Company.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Company's compensation programs and policies applicable to its executive
officers are administered by the Executive Compensation Committee of the Board
of Directors. The Executive Compensation Committee is made up entirely of
nonemployee directors. The members of the Executive Compensation Committee are
Robert C. Anderson, John C. Fitzpatrick, David H. Scott and Kenneth R. Gifford,
Jr. Richard W. Green, a member of the Executive Compensation Committee in 1998,
will retire as a director of the Company effective March 1, 1999.
Compensation Philosophy and Policies
The Company's compensation programs and policies are designed to enhance
shareholder value by aligning the financial interests of the executive officers
of the Company with those of the Company's shareholders. The Executive
Compensation Committee meets annually to review the salaries of executive
officers, to reestablish the base salary, to propose adjustments to the
incentive compensation portion and to establish a discretionary bonus plan if
all performance objectives are met. Income arising under the 1998 Stock Option
Plan currently does not qualify as performance-based compensation. The Company
intends to retain the flexibility necessary to provide total cash compensation
in line with competitors' practices, the Company's compensation philosophy and
the Company's best interests, including compensation that may not be deductible.
Components of Executive Officer Compensation
There are four primary components of executive compensation: base salary,
incentive bonus, discretionary bonus and options granted under the 1998 Stock
Option Plan.
Base Salary. The annual base salaries of executive officers are reviewed by
the Executive Compensation Committee, taking into consideration the level of
peer group salaries, the overall performance of the Company, the performance of
the portfolio and department under the executive officer's management control
and the individual executive officer's contribution and performance.
12
<PAGE> 15
The base salary for the Chief Executive Officer for 1998 was determined by
(i) examining the Company's performance against its preset goals, (ii) comparing
the Company's performance against its peer group competitors, (iii) evaluating
the effectiveness and performance of the Chief Executive Officer and (iv)
comparing the base salary of the Chief Executive Officer to that of other chief
executive officers in the Company's peer group. The total compensation received
by the Company's Chief Executive Officer is detailed in the Summary Compensation
Table.
Incentive Bonus Plan. The Company's Incentive Bonus Plan (the "Bonus Plan")
is a cash-based incentive bonus program. The Bonus Plan provides that bonuses
are computed on the Company's profit after a 20% return to shareholders, before
income taxes, less any gain on investments securities sold and plus any losses
on investment securities sold. The cash incentive is paid the first week of each
calendar quarter as to 70% of the incentive earned for the previous calendar
quarter. The Company on its audited annual financial statement makes an
adjustment of the incentive bonuses upon receipt. Upon receipt of the statement,
the incentive bonus is adjusted, and the remainder of the bonus, if any, is paid
to the recipients thereof. The Company's President & Chief Executive Officer
earns three and five hundredths percent of the profits as defined above, the
Company's Executive Vice President and Chief Credit Officer earns two and
forty-five hundredths percent of the profits, and the Company's Executive Vice
President and Chief Financial Officer earns two and fifty-five hundredths
percent of the profits.
Discretionary Bonus. Each year the Executive Compensation Committee
establishes a discretionary bonus plan for the Company's three highest ranking
executive officers. The bonus is paid if the Company meets certain preset
financial goals set forth in the Company's strategic plan. For 1998, the
Company's financial goals included a shareholder return of at least 18%, net
income of at least $4,000,000 and a return on assets of at least one and ninety
hundredths percent. Because the goals were met for 1998, Russell L. Duclos was
awarded a discretionary bonus of $25,000, and Linda J. Miles and Michael C.
Mayer each were awarded $20,000.
Stock Options. Under the Company's compensation philosophy, ownership of the
Company's Common Stock is a key element of executive compensation. The grant of
a stock option is intended to retain and motivate key executives and to provide
a direct link with the interest of the shareholders of the Company. In general,
stock option grants are determined based on (i) prior award levels, (ii) total
awards received to date by the individual executives, (iii) the total stock
award to be made and the executive's percentage participation in that award,
(iv) the executive's direct ownership of Company Common Stock, (v) the number of
options vested and nonvested and (vi) the options outstanding as a percentage of
total shares outstanding. In April 1998, the Company's executive officers
received stock options in amounts which are set forth in the Summary
Compensation Table.
Respectfully submitted,
Robert C. Anderson
John C. Fitzpatrick
David H. Scott
Kenneth R. Gifford, Jr.
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's cumulative total return to
shareholders during the past five years with that of the Standard & Poor's 500
Composite Stock Index (the "S&P") and the SNL Securities <$250M Bank Asset-Size
Index (the "SNL Securities Index"). The stock price performance shown on the
following graph is not necessarily indicative of future performance of the
Company's Common Stock.
13
<PAGE> 16
INTRODUCTION TO PROPOSALS 2, 3, 4 AND 5
The Board of Directors has unanimously determined that certain amendments to
the Company's Articles of Incorporation are advisable and voted to recommend
them to the Company's shareholders. The amendments are set forth in the Restated
Articles of Incorporation attached to this Proxy Statement as Annex I (the
"Restated Articles") and are being submitted in the form of four separate
proposals discussed in detail below under the captions "Amendment of Articles of
Incorporation Concerning Authorization of Preferred Stock," "Amendment of
Articles of Incorporation Concerning Supermajority Voting and Fair Price
Provision," "Amendment of Articles of Incorporation Concerning Action By Written
Consent of Shareholders" and "Amendment of Articles of Incorporation Concerning
Limitation of Director Liability and Indemnification of Agents." Each proposal
must be approved by holders of a majority of the outstanding shares of Common
Stock of the Company. Shareholders are urged to read the materials that follow
carefully. The proposed amendments may have potential negative effects. See
"Possible Negative Effects," below.
In general, the Board of Directors has noted an increase in merger and
acquisition activity in the financial services industry, including regional and
community banks and bank holding companies in the State of California, and the
evolution in recent years of certain tactics in corporate control contests and
other business transactions. These tactics include accumulation of a substantial
block of stock as a prelude to an attempted takeover or proxy fight, or a
partial tender offer followed by a second step business combination involving
less favorable consideration than was offered in the partial tender offer. The
Board of Directors believes such tactics and other tactics such as proxy fights,
hostile tender offers and "greenmail," in takeover situations are highly
disruptive to a corporation and often contrary to the overall best interests of
its shareholders, and can result in dissimilar and unfair treatment of
shareholders. These tactics also could severely curtail the ability of
management and the Board of Directors to weigh carefully and objectively any
takeover proposals which may be received by the Company or any alternative to
help ensure that all shareholders realize the full value of their investment.
The amendments to the Articles of Incorporation described in proposals 2, 3
and 4 of this Proxy Statement are being submitted for shareholder approval to
strengthen the Company's position against the use of these takeover tactics. The
proposed amendments are designed to help prevent a sudden change in control of
the Company and help assure that any transaction serves the best interests of
all shareholders through arm's-length negotiations with the Company's Board of
Directors. The amendments are intended to encourage persons seeking to acquire
control of the Company to initiate such efforts through negotiations with the
Company's Board of Directors. The Board of Directors believes that the
amendments will help give it the time necessary to evaluate unsolicited offers,
as well as appropriate alternatives, in a manner which assures fair treatment of
the Company's shareholders. The amendments are also intended to increase the
bargaining leverage of the Board of Directors, on behalf of the Company, in any
negotiations concerning a potential change of control of the Company.
Accordingly, the Board of Directors believes that the amendments to the
Company's Articles of Incorporation discussed in proposals 2, 3 and 4 are in the
best interests of the Company's shareholders.
The submission of the amendments described in proposals 2, 3 and 4 for
shareholder approval is not being made in response to any specific effort of
which the Board of Directors is aware to accumulate the Company's securities or
obtain control of the Company.
Possible Negative Effects
Proposals 2, 3 and 4 will have the overall effect of making it more
difficult to acquire and exercise control of the Company and may discourage
takeover attempts which are not supported by the Board of Directors. The
amendments will give management more control over the acceptance or rejection of
business combination offers and could protect incumbent directors by making more
difficult or discouraging proxy contests, the assumption of control by a
substantial shareholder or other takeover attempts not supported by the Board of
Directors. If adopted, the amendments could also have the effect of discouraging
a third party from making a tender offer or otherwise attempting to obtain
control of the
14
<PAGE> 17
Company even though such attempt might be beneficial to the Company's
shareholders. None of the proposed amendments will impede a takeover that is
approved by the directors of the Company who are unaffiliated with any
substantial shareholder who is involved in the takeover attempt.
Existing Defenses
On February 16, 1999, the Board of Directors approved amendments to the
Company's bylaws to add provisions relating to the establishment of agendas for
annual shareholder meetings and the nomination of candidates for director. New
Section 3A of Article II of the Company's bylaws provides the guidelines for
properly bringing business before any annual meeting of shareholders. The
provision provides that for business to be properly brought before a meeting by
a shareholder, the shareholder must have given timely notice thereof in writing
to the Secretary of the Company. To be timely, a shareholder's notice must be
delivered to the executive offices of the Company not less than 70 or more than
90 days prior to the first anniversary date of the preceding year's annual
meeting unless the date of the annual meeting is advanced by more than 20 days
or delayed by more than 70 days, in which case the notice may be delivered not
earlier than 90 days prior to the meeting and not later than the later of 70
days prior to the meeting or ten days following the date on which public
announcement of the date of such meeting is made. The provision also requires
that the notice contain certain detailed information as to the matter the
shareholder proposes, as described in the new provision.
New Section 3A of Article III of the Company's bylaws provides that director
nominations, other than those made by the Board of Directors, shall be made by
notification in writing delivered or mailed to the President of the Company not
less than 30 days or more than 60 days prior to any meeting of shareholders
called for election of directors. The provision also requires that the notice
contain certain information about the proposed nominee. A copy of the new
provisions of the bylaws may be obtained upon request of the Corporate Secretary
of the Company at the Company's principal offices.
The recent bylaw amendments will provide the Company with the necessary time
and information to adequately review and respond to shareholder proposals and
nominees to be presented for consideration at an annual meeting. Accordingly,
the Board of Directors believes the recent amendments to the Company's bylaws
are in the best interests of the Company and its shareholders. However, the new
provisions may be viewed as having the effect of making it more difficult for
another person or entity to present their proposals to other shareholders for
action, including action to obtain control of the Company, or to replace members
of the Company's Board of Directors.
Other than the recent bylaw amendments discussed above, the Board of
Directors does not believe that the Articles of Incorporation or the bylaws of
the Company currently contain any provisions which should be viewed as
anti-takeover devices. The Board of Directors has no present intention of
soliciting a shareholder vote on any proposals, other than those described in
this Proxy Statement, relating to a possible business combination involving the
Company.
The amendments to the Articles of Incorporation described in proposal 5 of
this Proxy Statement are being submitted for shareholder approval to strengthen
the Company's ability to recruit and retain qualified persons as directors and
officers of the Company. As such, proposal 5 reflects that the financial
services industry is very competitive and the Company's ability to successfully
compete depends on, among other things, the Company's ability to attract and
retain qualified personnel.
The amendments described in proposals 2, 3, 4 and 5 are contained in the
Restated Articles set forth in Annex I to this Proxy Statement, in substantially
the form in which they will take effect if approved by the shareholders. The
following descriptions of the amendments are qualified by reference to Annex I.
In addition, if the amendments are approved by the shareholders, any necessary
conforming amendments will be made to the Company's bylaws.
15
<PAGE> 18
PROPOSAL 2
AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING AUTHORIZATION OF
PREFERRED STOCK
Proposed Article III of the Restated Articles authorizes 2,000,000 shares of
Preferred Stock. The Board believes that it is in the best interests of the
Company and its shareholders to authorize 2,000,000 shares of Preferred Stock,
which may be issued in one or more classes or series and which shall have such
rights, preferences, privileges and restrictions as determined by the Board of
Directors.
The Board of Directors recommends adoption of Proposal 2 in order to provide
the Company with additional flexibility in terms of capital structure and would
permit the Board to react without further shareholder approval to the Company's
capital needs or to acquisitions or other strategic opportunities which may
arise in the future. Issuance of shares of preferred stock may discourage or
make more difficult or expensive certain mergers, tender offers or other
purchases of the Company's Common Stock.
The majority of publicly traded companies has authorized one or more classes
of Preferred Stock. Preferred Stock is generally defined to mean any class of
equity securities which has a dividend and/or liquidation preference over common
stock. Pursuant to the Restated Articles, the rights, preferences, privileges
and restrictions of any Preferred Stock shall be determined by the Board of
Directors. As a result, in the event that the Restated Articles are adopted by
shareholders, the Board of Directors of the Company may establish classes or
series of Preferred Stock that have certain dividend and/or liquidation
preferences over the Company's Common Stock.
Significant amounts of authorized but unissued shares of Preferred Stock
could discourage potential takeover attempts not approved by the Board of
Directors and could eliminate the possibility that the Company's shareholders
might realize a premium of the kind which may result from actual or rumored
takeover attempts. Issuance by the Company of shares of Preferred Stock in the
future, due to future mergers, acquisitions or public or private offerings
thereof, may also result in the dilution of voting rights of existing
shareholders.
The Company does not at the present time have any plan or intention to issue
shares of such Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL 2 TO AMEND AND
RESTATE THE COMPANY'S ARTICLES OF INCORPORATION TO AUTHORIZE 2,000,000 SHARES OF
PREFERRED STOCK.
PROPOSAL 3
AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING SUPERMAJORITY
VOTING AND FAIR PRICE PROVISION
Proposed Article VI of the Restated Articles contains a "Supermajority
Voting and Fair Price" provision to both encourage potential acquirers to
negotiate with the Company and to protect shareholders from being unfairly
treated in mergers or other business combinations with persons who own a
substantial amount of the Company's stock. The Supermajority Voting and Fair
Price provision applies to mergers and certain other types of business
combinations with persons holding 20% or more of the shares held by voting stock
of the Company (an "Interested Stockholder"). The provision does not apply at
all, however, to the classic bank merger in which the other party is not an
Interested Stockholder and the transaction is brought to and approved by the
Board of Directors at the outset.
In general, the Supermajority Voting and Fair Price provision requires, in a
merger or certain other business combinations involving an Interested
Stockholder, (1) that 662/3% of the shares held by shareholders who are
independent of the Interested Stockholder be voted for the business combination,
(2) that each shareholder who is independent of the Interested Stockholder
receive at least a specified amount for his or her shares and (3) that certain
other requirements are met. The provision also requires that any amendment or
repeal to the Supermajority Voting and Fair Price provision shall require the
approval of the
16
<PAGE> 19
holders of shares representing at least 66 2/3% of the combined voting power of
the outstanding shares of capital stock of the Company entitled to vote, voting
together as a single class.
The Supermajority Voting and Fair Price provision is designed to encourage
potential acquirers to negotiate at arm's length with the Board of Directors. In
the absence of such negotiations, this provision seeks to ensure that any
multi-step attempt to take over the Company will be made on terms offering
similar treatment to all shareholders. In the past, there have been takeovers of
publicly held companies accomplished by the purchase of blocks of stock in open
market purchases or otherwise at a price above prevailing market prices,
followed by a second step, merger or other transaction in which the shares
acquired are purchased for less than the value paid in the first step.
The Supermajority Voting and Fair Price provision will not apply to an
otherwise covered business combination in certain circumstances. First, if the
business combination is approved by 66 2/3% of the "Disinterested Directors,"
the supermajority voting and fair price rules do not apply. For purposes of the
provision, a Disinterested Director is defined to include a member of the Board
of Directors who is not affiliated with the Interested Stockholder and who was a
member of the Board of Directors prior to the time the Interested Stockholder
became an Interested Stockholder and a successor director who is recommended by
a majority of Disinterested Directors. Second, the supermajority voting and fair
price rules do not apply if there is pending against any subsidiary of the
Company any proceeding or other action by the Federal Deposit Insurance
Corporation pursuant to Section 1818(a) or 1823(c) of Title 12 of the United
States Code or there is outstanding against any subsidiary any order of the
Superintendent of Banks pursuant to Financial Code Section 662, Sections
3100-3132 or Sections 3180-3187. Further, the provision does not apply at all to
the classic bank merger in which the other party is not an Interested
Stockholder and the transaction is brought to and approved by the Board of
Directors at the outset. Where the Supermajority Voting and Fair Price provision
does not apply, a simple shareholders' majority is required to approve the
business combination.
Where the Supermajority Voting and Fair Price rules apply, the requirements
in addition to the 66 2/3% approval of shares held by other than the Interested
Stockholder include: (a) the consideration to be received in the business
combination is in cash or in the same form as the Interested Stockholder has
paid for the largest number of shares acquired by such Interested Stockholder;
(b) the per share consideration to be received by holders of outstanding stock
in the business combination (other than the Interested Stockholder) is at least
equal to the highest of (i) the highest per share price paid by such Interested
Stockholder in acquiring the Company's stock of the same class in the two years
prior to the announcement of the business combination, or in the transaction in
which it became an Interested Stockholder, if within two years of the date of
first public announcement of the proposal, (ii) the fair market value per share
on the announcement date or on the date on which the Interested Stockholder
became an Interested Stockholder if within two years of the first public
announcement of the proposal, or (iii) as to shares other than common stock, the
highest preference per share to which the holder of such shares is entitled upon
a liquidation of the Company; and (c) after becoming an Interested Stockholder
and prior to the consummation of such business combination (i) such Interested
Stockholder must not have become the beneficial owner of any additional shares
of the voting stock of the Company, except as part of the transaction which
results in such shareholder becoming an Interested Stockholder, within the two
year period prior to consummation of the business combination, (ii) such
Interested Stockholder must not have received the benefit, directly or
indirectly (except proportionately as a shareholder), of any loans, advances,
guarantees, pledges or other financial assistance or tax credits provided by the
Company, and (iii) except as approved by a 66 2/3% majority of the directors who
are Disinterested Directors, there shall have been (A) no failure to declare and
pay at the regular date therefore any full dividends on any preferred stock or
(B) no reduction in the annual rate of dividends paid on Common Stock, and there
shall have been (C) an increase in the annual rate of dividends necessary to
reflect certain reclassification and recapitalization.
The Supermajority Voting and Fair Price provision will not prevent a merger
or similar transaction following a tender offer in which all shareholders
receive substantially the same price for their shares and where either 66 2/3%
of the shares have been voted for the merger or 66 2/3% of the Disinterested
Directors have approved and a majority of the shareholders have also approved
the transaction. Except for the restrictions on the specified business
combinations, the Supermajority Voting and Fair Price provision will
17
<PAGE> 20
not prevent a holder of a controlling interest from exercising control over the
Company or prevent such a holder from increasing his or her share ownership. The
existence of the Supermajority Voting and Fair Price provision may, however,
tend to encourage persons seeking control of the Company to negotiate terms of a
proposed merger or similar transactions with the Company's Board of Directors.
The Board of Directors recognizes that not all two-tiered tender offers or
other two-step transactions are intended to pressure shareholders into hasty
decisions or to discriminate among shareholders. However, taking all factors
into consideration, the Board believes that it is appropriate to take action to
reduce the possibility to two-tiered transactions which are unfair.
While the Board believes the Supermajority Voting and Fair Price provision
is in the best interest of the Company's shareholders, there are several
possible negative considerations. The effect of the Supermajority Voting and
Fair Price provision may be to deter a future takeover attempt which the Board
has not approved, but which a majority of the shareholders may deem to be in
their best interests or in which shareholders may receive a premium for their
shares over the then market value. The adoption of the Supermajority Voting and
Fair Price provision also may make it more difficult to obtain shareholder
approval of transactions covered by the provision, such as mergers or other
business combinations with persons who are Interested Stockholders, even if
approved by a majority, but less than 66 2/3% of the Disinterested Directors and
favored by a majority of the shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL 3 TO AMEND AND
RESTATE THE COMPANY'S ARTICLES OF INCORPORATION TO PROVIDE A SUPERMAJORITY
VOTING AND FAIR PRICE PROVISION.
PROPOSAL 4
AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING ACTION BY WRITTEN
CONSENT OF SHAREHOLDERS
Proposed Article VII of the Restated Articles provides that shareholders may
not use the written consent procedure to take shareholder action without a
meeting unless the action has been approved by the Board of Directors.
Under the California General Corporation Law, unless otherwise provided in a
corporation's articles of incorporation, any action which may be taken at any
annual or special meeting of shareholders may be taken without a meeting and
without prior notice if a written consent setting forth the action so taken is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize such action at a meeting of
the shareholders at which all shares entitled to vote thereon were present and
voted. The Company's Articles of Incorporation do not presently contain any
provision affecting the ability of shareholders of Company to act by written
consent.
Proposed Article VII would permit shareholders of the Company to act by
written consent only if the Board of Directors had previously approved the
action which would prevent any shareholders of the Company from using the
written consent procedure to take shareholder action without advising or
consulting with all other shareholders. Proposed Article VII also provides that
any amendment or repeal to proposed Article VII shall require the approval of
the holders of shares representing at least 66 2/3% of the combined voting power
of the outstanding shares of capital stock of the Company entitled to vote,
voting together as a single class.
The Board of Directors recommends adoption of this proposed amendment in
order to assure that all shareholders of the Company entitled to vote on a
proposed corporate action have the opportunity to participate in determining if
such action is appropriate through the normal meeting process, except in cases
where the Board of Directors has approved such action. The Board of Directors
believes that it is inappropriate for shareholders to take corporate action
without notice to all other shareholders, even if a majority of the shareholders
favors such action. It is felt that the orderly process which is normally used
when actions are proposed at meetings is preferable to the consent procedure,
unless the Board of Directors has approved such action. In this way, all
shareholders are given an opportunity to consider proposals and, if appropriate,
to inform other shareholders of their views. Additionally, management is
provided with an
18
<PAGE> 21
opportunity to review and respond to proposed actions. The proposed amendment
would not limit the existing right of shareholders to call a special meeting of
shareholders.
Proposed Article VII may be viewed as having the effect of discouraging an
attempt by another person or entity to gain control of the Company or take
action which might facilitate gaining control of the Company, after the
acquisition of a substantial percentage of the shares of the Company's
outstanding stock. The effect of the proposed amendment would be to encourage
any person intending such a takeover to negotiate with the Board of Directors
rather than to take unilateral action without notice to the Board of Directors
or other shareholders. The Board of Directors believes that such an orderly
procedure is in the best interests of the Company and its shareholders. However,
the proposed amendment could limit shareholders' approval of certain types of
transactions that might be proposed whether or not such transactions were
favored by a majority of the shareholders, and could enhance the ability of
officers and directors to retain their positions by precluding changes in
control through the written consent procedure.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL 4 TO AMEND AND
RESTATE THE COMPANY'S ARTICLES OF INCORPORATION TO PROVIDE THAT SHAREHOLDERS MAY
ACT BY WRITTEN CONSENT IN LIEU OF A MEETING ONLY IF THE BOARD OF DIRECTORS HAS
PREVIOUSLY APPROVED SUCH ACTION.
PROPOSAL 5
AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING LIMITATION OF
DIRECTOR LIABILITY AND INDEMNIFICATION OF AGENTS
Proposed Article IV of the Restated Articles would limit the liability of a
director of the Company to the Company or its shareholders for monetary damages
for breach of the fiduciary duty of care to the fullest extent permissible under
California law. Proposed Article V of the Restated Articles would permit the
Company to indemnify its agents to the fullest extent permissible under
California law. Although the Company's bylaws currently provide for
indemnification of the Company's agents, proposed Article V would permit the
Company to provide broader indemnification than specifically provided under the
provisions of the California General Corporation Law (the "CGCL").
A corporation's power to limit the liability of its directors for monetary
damages is provided in Section 309 of the CGCL. Section 309 provides that a
director must perform his or her duties in good faith and in a manner that such
person believes to be in the best interests of the corporation and its
shareholders and with such care, including reasonable inquiry, as an ordinarily
prudent person in a similar position would use under similar circumstances.
Section 309 further provides that the liability of a director for monetary
damages may be eliminated or limited in a corporation's articles of
incorporation.
Proposed Article IV would eliminate the liability of a director of the
Company to the Company or its shareholders for monetary damages for breach of a
director's fiduciary duty of care, except in certain cases for which liability
cannot be eliminated under California law. Under California law, a director's
liability cannot be eliminated for (i) acts or omissions that involve
intentional misconduct or a knowing and culpable violation of law, (ii) acts or
omissions that a director believes to be contrary to the best interests of the
corporation or its shareholders or that involve the absence of good faith, (iii)
any transaction from which a director derived an improper personal benefit, (iv)
acts or omissions showing a reckless disregard for the director's duty to the
corporation and its shareholders in which the director was aware of a risk of
serious injury to the corporation, (v) acts or omissions that constitute an
unexcused pattern of inattention amounting to an abdication of the director's
duty to the corporation or its shareholders, (vi) failure to comply with the
director's duty to disclose the director's material financial interest in a
transaction of the corporation, (vii) making an unauthorized distribution or
loan to the corporation's shareholders and (viii) acts or omissions as an
officer notwithstanding that the officer is also a director or that the
director's negligent actions have been ratified by the corporation's directors.
Further, proposed Article IV would not eliminate the liability of any director
for acts that occurred prior to the effectiveness of proposed Article IV.
In recent years, investigations, claims, actions, suits or other proceedings
(including derivative actions) seeking to impose liability on, or involving as
witnesses, directors and officers of corporations have become increasingly
common. Such proceedings are typically extremely expensive regardless of the
19
<PAGE> 22
eventual outcome. In view of the costs and uncertainties of litigation in
general, it is often prudent to settle proceedings in which claims against a
director or officer are made. Settlement amounts, even if immaterial to the
corporation involved and minor compared to the enormous amounts frequently
claimed, often exceed the financial resources of most individuals. Even in
proceedings in which a director or officer is not named as a defendant, such
individual may incur substantial expenses or attorneys' fees if he or she in
called as a witness or becomes involved in the proceeding in any other way. As a
result, an individual may conclude that potential exposure to the costs and
risks of proceedings in which he or she may become involved may exceed any
benefit to him from serving as a director or officer of a corporation. This is
particularly true for directors who are not also employees.
In addition, obtaining director and officer liability insurance, which
protects directors and officers from personal losses resulting from proceedings
involving them by reason of their service as directors and officers, is becoming
increasingly difficult and expensive. Coverage under director and officer
liability insurance is no longer routinely offered by a variety of insurers at a
reasonable cost and is frequently subject to severely restrictive terms.
Competition in the financial services industry is intense and the Company's
ability to compete effectively depends, in part, on its ability to attract and
retain qualified persons for officer and director positions. While the Company
has not experienced any problems to date in recruiting or retaining qualified
persons as directors or officers, the Board of Directors believes that adoption
of proposed Articles IV and V will enable the Company to continue to attract and
retain qualified persons for director and officer positions. Moreover, current
management may feel more confident relying on indemnity based on an indemnity
agreement, as would be permissible under proposed Article V, rather than merely
relying on a bylaw provision providing for the Company's ability to indemnify
its agents. Accordingly, the Board of Directors has determined that the proposed
amendments are in the best interests of the Company and its shareholders.
The Company is not aware of any pending or threatened claims against any
director or officer for breach of such person's fiduciary duties, and there have
been no such claims in the history of the Company. However, if for any reason
director and officer liability insurance coverage is not obtained or available,
the provision permitting broader indemnification could require the Company in
the future to pay the costs of legal defense and judgments arising out of
injuries to third parties caused by the acts of its officers or directors.
Further, the provision limiting director liability for monetary damages will
preclude the Company and its shareholders from recovering monetary damages
against directors for negligence and other acts not specifically excluded under
Section 204 of the CGCL.
A corporation's power to indemnify its agents (including directors, officers
and employees) is established by Section 317 of the CGCL. California law permits
indemnification of expenses incurred in derivative or third-party actions,
except that with respect to derivative actions (i) no indemnification may be
made without court approval when a person is adjudged liable to the corporation
in the performance of that person's duty to the corporation and its
shareholders, unless a court determines such person is fairly and reasonably
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine and (ii) no indemnification
may be made without court approval in respect of amounts paid or expenses
incurred in settling or otherwise disposing of a threatened or pending action or
amounts incurred in defending a pending action which is settled or otherwise
disposed of without court approval. The indemnification permitted by Section 317
is only applicable to acts of agents taken in good faith and believed to be in
the best interests of the corporation and its shareholders, as determined by a
majority vote of a disinterested quorum of the directors, independent legal
counsel (if a quorum of independent directors is not obtainable), a majority
vote of a quorum of the shareholders (excluding shares owned by the indemnified
party), or the court handling the action. California law requires
indemnification when the individual has successfully defended the action on the
merits.
Section 204 of the CGCL provides that a corporation may include in its
articles of incorporation provisions which extend the scope of indemnification
expressly permitted by Section 317, subject to certain limitations. The most
significant effect of a corporation's articles of incorporation permitting
indemnification in excess of the express limits set by Section 317 for breach of
duty to the corporation or
20
<PAGE> 23
its shareholders is to authorize a corporation to enter into indemnity
agreements with its agents, including officers and directors.
Proposed Article V would permit the Company to indemnify its agents in
excess of that expressly provided under Section 317 of the CGCL. However,
Article V would not permit the Company to indemnify any agent for any acts,
omissions or transactions from which a director may not be relieved of liability
as discussed above under "Limitation of Personal Liability of Directors," as to
circumstances under which indemnification is expressly prohibited by Section 317
as discussed above.
The Board of Directors recommends adoption of proposal 5 in order to enable
the Company to continue to recruit and retain qualified persons for director and
officer positions. However, if for any reason director and officer liability
insurance coverage is not obtained or available, proposed Articles IV and V
permitting the limitation of director liability and broader indemnification,
respectively, could require the Company in the future to pay the costs of legal
defense and judgments arising out of injuries to third parties caused by the
acts of its directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL 5 TO AMEND AND
RESTATE THE COMPANY'S ARTICLES OF INCORPORATION (i) TO LIMIT THE LIABILITY OF A
DIRECTOR OF THE COMPANY TO THE COMPANY AND ITS SHAREHOLDERS FOR MONETARY DAMAGES
FOR BREACH OF A DIRECTOR'S FIDUCIARY DUTY OF CARE TO THE FULLEST EXTENT
PERMISSIBLE UNDER CALIFORNIA LAW AND (ii) TO PROVIDE FOR THE ABILITY OF THE
COMPANY TO INDEMNIFY ITS AGENTS TO THE FULLEST EXTENT PERMISSIBLE UNDER
CALIFORNIA LAW.
PROPOSAL 6
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of Deloitte & Touche LLP as the Company's independent
auditors for the fiscal year ending December 31, 1999, subject to ratification
by the shareholders. Representatives of Deloitte & Touche LLP are not expected
to be present at the Company's Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF DELOITTE &
TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
21
<PAGE> 24
REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROPOSALS,
NOMINATION OF DIRECTORS AND OTHER SHAREHOLDER BUSINESS
Under the Rules of the SEC, if a shareholder wants to include a proposal in
the Company's Proxy Statement and form of proxy for presentation at the
Company's 2000 Annual Meeting of Shareholders, the proposal must be received by
the Company at its principal executive offices by November 21, 1999.
Under the Company's bylaws, as permitted by the SEC, certain procedures are
provided which a shareholder must follow to nominate persons for election as
directors or to introduce an item of business at an annual meeting of
shareholders.
Nomination of directors must be made by notification in writing delivered or
mailed to the President of the Company at the Company's principal executive
offices not less than 30 days or more than 60 days prior to any meeting of
shareholders called for election of directors. The Company's annual meeting of
shareholders is generally held on the third Tuesday of April. If the Company's
2000 Annual Meeting of Shareholders is held on schedule, the Company must
receive notice of any nomination no earlier than February 18, 2000, and no later
than March 19, 2000. The Chairman of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedures.
If the Chairman of the meeting acknowledges the nomination of a person not made
in compliance with the foregoing procedures, the persons named as proxies in the
proxy materials relating to that meeting will use their discretion in voting the
proxies when the nomination is made at the meeting.
Notice of any business item proposed to be brought before an annual meeting
by a shareholder must be received by the Secretary of the Company not less than
70 days or more than 90 days prior to the annual meeting. If the Company's 2000
Annual Meeting of Shareholders is held on schedule, the Company must receive
notice of any proposed business item no earlier than January 19, 2000, and no
later than February 8, 2000. If the Company does not receive timely notice, the
Company's bylaws preclude consideration of the business item at the annual
meeting.
The Company's bylaws also provide that notices regarding nomination of
directors must contain certain information about the director nominee. With
respect to notice of a proposed item of business, the bylaws provide that the
notice must include a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
certain information regarding the shareholder giving the notice. Shareholders
may obtain a copy of the Company's bylaws by sending a written request to the
Secretary of the Company at the Company's principal executive offices.
OTHER BUSINESS
The Company knows of no other business that will be presented at the Annual
Meeting. If any other business is properly brought before the Annual Meeting, it
is intended that proxies in the enclosed form will be voted in accordance with
the judgment of the persons voting the proxies.
Whether or not you intend to be present at the Annual Meeting, we request
you to return your signed proxy promptly.
By Order of the Board of Directors,
David H. Scott, Secretary
Redding, California
March 19, 1999
22
<PAGE> 25
SUPPLEMENTAL 1998 ANNUAL REPORT INFORMATION
The following information is being furnished to shareholders of Redding
Bancorp (the "Company") as part of the Redding Bancorp 1998 Annual Report to
Shareholders and should be read in conjunction therewith.
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company is aware that Van Kasper & Company located at 600 California
Street, Suite 1700, San Francisco, California 94108, and Hoefer & Arnett,
Incorporated located at 353 Sacramento Street, 10th Floor, San Francisco,
California 94111, handle trades in the Company's Common Stock. Trades may be
reported on the National Association of Securities Dealers' Electronic Bulletin
Board. There is no established public trading market for the Company's Common
Stock.
The following table, which summarizes trading activity during the
Company's last two fiscal years, is based on information provided by Van Kasper
& Company. The quotations reflect the price that would be received by the seller
without retail mark-up, mark-down or commissions and may not have represented
actual transactions.
<TABLE>
<CAPTION>
Sales Price
-----------------
Quarter Ended: High Low Volume
-------------- ---- --- ------
<S> <C> <C> <C>
March 31, 1997 $10.67 $10.67 2,175
June 30, 1997 $10.67 $10.67 32,280
September 30, 1997 $10.83 $10.33 19,914
December 31, 1997 $11.42 $10.00 26,223
March 31, 1998 $11.33 $10.67 4,440
June 30, 1998 $11.42 $10.75 648
September 30, 1998 $16.00 $16.00 426
December 31, 1998 $17.50 $17.50 1,288
</TABLE>
On October 22, 1998, the Company paid a $.50 per share cash dividend to
shareholders of record on October 1, 1998. On October 22, 1997, the Company paid
a $.33 per share cash dividend to shareholders of record as of October 1, 1997,
and on October 22, 1996, the Company paid a $.25 per share cash dividend to
shareholders of record as of October 1, 1996.
The Company's ability to pay dividends is subject to certain regulatory
requirements. The Federal Reserve Board ("FRB") generally prohibits a bank
holding company from declaring or paying a cash dividend which would impose
undue pressure on the capital of subsidiary banks or would be funded only
through borrowing or other arrangements that might adversely affect a bank
holding company's financial position. The FRB's policy is that a bank holding
company should not continue its existing rate of cash dividends on its common
stock unless its net income is sufficient to fully fund each dividend and its
prospective rate of earnings retention appears consistent with its capital
needs, asset quality and overall financial condition.
The power of the board of directors of an insured depository institution
to declare a cash dividend or other distribution with respect to capital is
subject to statutory and regulatory restrictions which limit the amount
available for such distribution depending upon the earnings, financial condition
and cash needs of the institution, as well as general business conditions. The
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
prohibits insured depository institutions from paying management
23
<PAGE> 26
fees to any controlling persons or, with certain limited exceptions, making
capital distributions, including dividends, if, after such transaction, the
institution would be undercapitalized.
In addition to the restrictions imposed under federal law, banks
chartered under California law generally may only pay cash dividends to the
extent such payments do not exceed the lesser of retained earnings of the bank
or the bank's net income for its last three fiscal years (less any distributions
to shareholders during such period). In the event a bank desires to pay cash
dividends in excess of such amount, the bank may pay a cash dividend with the
prior approval of the Superintendent in an amount not exceeding the greatest of
the bank's retained earnings, the bank's net income for its last fiscal year, or
the bank's net income for its current fiscal year.
Regulators also have authority to prohibit a depository institution from
engaging in business practices which are considered to be unsafe or unsound,
possibly including payment of dividends or other payments under certain
circumstances even if such payments are not expressly prohibited by statute.
As of March 1, 1999, there were approximately 298 holders of record of
the Company's Common Stock.
CHANGE IN ACCOUNTANTS
Effective April 1, 1998, Deloitte & Touche LLP was engaged as the
Company's principal independent auditors to audit the Company's consolidated
financial statements for the year ended December 31, 1998, and KPMG LLP was
dismissed. The decision to change independent auditors was approved by the Audit
Committee of the Company's Board of Directors. In the period from December 31,
1992, through December 31, 1997, KPMG LLP issued no audit report which was
qualified or modified as to uncertainty, audit scope or accounting principles,
or which contained adverse opinions or disclaimers of opinion on any of the
Company's financial statements and, during the period from December 31, 1992,
through March 31, 1998, there were no disagreements with KPMG LLP on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
ADDITIONAL SELECTED FINANCIAL DATA
The selected condensed consolidated financial data set forth below for
the five years ended December 31, 1998, have been derived from the Company's
audited financial statements. The selected condensed consolidated financial data
set forth below as of December 31, 1996, 1995 and 1994, and for the two years
ended December 31, 1995, have been derived from the Company's historical
financial statements not included in this report. The Company's historical
financial statements may not be indicative of future performance. The
information set forth below should be read in conjunction with "Financial
Information-Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Company's historical financial statements and
notes thereto, included elsewhere in the Annual Report.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(dollars in thousands, except share data)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME:
Total Interest Income $ 16,322 $ 15,764 $ 15,565 $ 15,122 $ 11,292
Net Interest Income 10,436 9,430 8,767 8,740 6,966
Provision for Loan 500 1,024 2,160 1,045 655
Losses
Total Other Income 2,539 2,636 2,079 1,698 843
Net Income 4,054 3,658 2,615 2,931 2,158
BALANCE SHEETS:
Total Assets 216,085 204,820 192,389 185,995 156,829
Total Loans 148,202 113,410 111,353 115,668 104,939
</TABLE>
24
<PAGE> 27
<TABLE>
<S> <C> <C> <C> <C> <C>
Allowance for Loan
and Lease Losses (ALLL) (3,235) (2,819) (2,294) (2,053) (1,730)
Total Deposits 188,621 180,673 171,368 166,869 140,824
Shareholders' Equity $ 24,654 $ 21,825 $ 19,180 $ 17,266 $ 14,411
PERFORMANCE RATIOS:
Return on Average Assets 1.98% 1.83% 1.35% 1.74% 1.50%
Return on Average Equity 18.04% 18.27% 14.41% 18.45% 15.69%
Dividend Payout 33.18% 24.62% 25.83% 23.04% 26.08%
Average Equity to
Average Assets 10.97% 10.03% 9.35% 9.42% 9.58%
Tier 1 Risk-Based
Capital Ratio - Bank 14.33% 14.91% 13.70% 13.40% 13.25%
Total Risk-Based
Capital Ratio - Bank 15.58% 16.16% 14.90% 14.60% 14.45%
Net Interest Margin 5.57% 5.20% 4.96% 5.62% 5.21%
Earning Assets to
Total Assets 91.48% 90.90% 91.10% 92.30% 93.10%
Nonperforming Assets
to Total Assets .49% .50% 3.63% 1.64% .96%
Annualized Net
Charge-offs .06% .44% 1.64% .64% .05%
ALLL to Total Loans 2.18% 2.49% 2.06% 1.77% 1.65%
Nonperforming Loans
to ALLL 30.54% 23.90% 99.10% 137.40% 84.50%
SHARE DATA:
Common Shares
Outstanding (in
thousands) 2,690 2,684 2,700 2,700 2,700
Book Value Per Share $9.12 $8.13 $7.10 $6.39 $5.34
Basic Earnings Per Share $1.51 $1.36 $0.97 $1.08 $0.80
Diluted Earnings Per Share $1.42 $1.35 $0.97 $1.08 $0.80
Cash Dividends Per Share $.050 $0.33 $0.25 $0.25 $0.21
</TABLE>
25
<PAGE> 28
EXHIBIT 2 AMENDED ARTICLES OF INCORPORATION
RESTATED ARTICLES OF INCORPORATION
RUSSELL L. DUCLOS and LINDA J. MILES certify that:
1. They are the president and the chief financial officer, respectively,
of REDDING BANCORP, a California corporation.
2. The articles of incorporation of this corporation are amended and
restated to read as follows:
ARTICLES OF INCORPORATION
OF
REDDING BANCORP
I
The name of this corporation is Redding Bancorp.
II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California, other than the banking business, the trust company business
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
III
This corporation is authorized to issue two classes of shares designated
respectively "Common Stock" and "Preferred Stock." The number of shares of
Common Stock authorized is 10,000,000 and the number of shares of Preferred
Stock authorized is 2,000,000.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of shares of any
series of Preferred Stock and to determine the designation of any such series.
The Board of Directors is also authorized to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock and, within the limits and restrictions
stated in any resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series, to increase or decrease
(but not below the number of shares of such series then outstanding) the number
of shares of any such series subsequent to the issue of shares of that series.
IV
The liability of the directors of this corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
V
The Board of Directors of this corporation may by bylaw, agreement or
otherwise provide for the indemnification of agents to the fullest extent
permissible under California law.
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VI
Section 1. In addition to any affirmative vote required by law or these
articles of incorporation, and except as otherwise expressly provided in Section
2 of this Article VI, any "Business Combination" (as hereinafter defined) shall
require the affirmative vote of the holders of at least 66-2/3% of the then
outstanding shares of capital stock of this corporation entitled to vote other
than the voting stock of which an Interested Stockholder (as hereinafter
defined) or an Affiliate (as hereinafter defined) is a beneficial owner, voting
together as a single class. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required or that a lesser
percentage may be specified by law or otherwise.
In addition to the higher vote requirement, except as otherwise
expressly provided in Section 2 of this Article VI, prior to effecting any such
Business Combination all of the following conditions shall have been met:
A. The aggregate amount of the cash and the "Fair Market Value" (as
hereinafter defined) as of the date of the consummation of the Business
Combination of consideration other than cash to be received per share by holders
of the Common Stock in such Business Combination shall be at least equal to the
higher of the following:
(1) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
by the "Interested Stockholder" for any shares of the Common Stock
acquired by it (a) within the two-year period immediately prior to the
first public announcement of the proposal of the Business Combination
(the "Announcement Date") or (b) in the transaction in which it became
an Interested Stockholder, if within two years of the Announcement Date,
whichever is higher; and
(2) the Fair Market Value per share of the Common Stock on the
Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder the ("Determination Date"), if within
two years of the Announcement Date, whichever is higher.
B. The aggregate amount of the cash and the Fair Market Value as of the
date of the consummation of the Business Combination of consideration other than
cash to be received per share by holders of shares of any other class of
outstanding stock of this corporation shall be at least equal to the highest of
the following:
(1) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
by the Interested Stockholder for any shares of such class of stock
acquired by it (a) within the two-year period immediately prior to the
Announcement Date or (b) in the transaction in which it became an
Interested Stockholder, if within two years of the Announcement Date,
whichever is higher;
(2) (if applicable) the highest preferential amount per share to
which the holders of shares of such class of stock are entitled in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the corporation; and
(3) the Fair Market Value per share of such class of stock on the
Announcement Date or on the Determination Date, if within two years of
the Announcement Date, whichever is higher.
C. The consideration to be received by holders of a particular class of
outstanding stock of this corporation (including Common Stock) shall be in cash
or in the same form as the Interested Stockholder has previously paid for shares
of such class of stock. If the Interested Stockholder has paid for shares of any
class of stock with varying forms of consideration, the form of consideration
for such class of stock shall be either cash or the form used to acquire the
largest number of shares of such class of stock previously acquired by it. The
price determined in accordance with subparagraphs A and B of this Section
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1 shall be subject to appropriate adjustment in the event of any stock dividend,
stock split, combination of shares or similar event.
D. After such shareholder has become an Interested Stockholder and prior
to the consummation of such Business Combination and except to the extent that
the corporation may be prohibited by law from making a distribution to
shareholders: (1) except as approved by 66-2/3% of the "Disinterested Directors"
(as hereinafter defined), there shall have been no failure to declare and pay at
the regular date therefor any dividends (whether or not cumulative) on the
outstanding Preferred Stock of this corporation; (2) there shall have been (a)
no reduction in the annual rate of dividends paid on the Common Stock of this
corporation (except an necessary to reflect any subdivision of the Common
Stock), except as approved by 66-2/3% of the Disinterested Directors, and (b) an
increase in such annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of reducing the
number or outstanding shares of the Common Stock, unless the failure so to
increase such annual rate is approved by 66-2/3% of the Disinterested Directors;
and (3) such Interested Stockholder shall have not become the beneficial owner
of any additional shares of stock of this corporation except as part of the
transaction which results in such shareholder becoming an Interested Stockholder
within the two year period prior to such consummation.
E. After such shareholder has become an Interested Stockholder, such
Interested Stockholder shall not have received the benefit, directly or
indirectly (except proportionately as a shareholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or other
tax advantages provided by this corporation or any "Subsidiary" (as hereinafter
defined), whether in anticipation of or in connection with such Business
Combination or otherwise.
F. A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to all
holders of the stock of this corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions).
Section 2. The provisions of Section 1 of this Article VI shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
provision of these articles of incorporation, if the Business Combination shall
have been approved by 66-2/3% of the Disinterested Directors; or, if either
A. there is pending against any Subsidiary any proceeding or other
action by the Federal Deposit Insurance Corporation pursuant to 1818(a) or
1823(c) of Title 12 of the United States Code; or
B. there is outstanding against any Subsidiary any order of the
Superintendent of Banks pursuant to Financial Code 662, 3100-3132 or 3180-3187
or any other provision of similar purpose as hereinafter adopted and as the same
may be amended at a future time.
Section 3. For the purposes of this Article VI the following definitions
apply:
A. A "person" means any individual, firm, corporation or other entity.
B. "Interested Stockholder" means any person (other than this
corporation or any Subsidiary) who or which:
(1) is the beneficial owner, directly or indirectly, of more than
20% of the issued and outstanding stock of this corporation; or
(2) is an "Affiliate" of this corporation and at any time within
the two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 20% or more of the issued
and outstanding stock of this corporation; or
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(3) is an assignee of or has otherwise succeeded to any shares of
stock of this corporation which were at any time within the two-year
period immediately prior to the date in question beneficially owned by
any Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of
1933.
C. A person shall be a "beneficial owner" of stock of this corporation:
(1) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; or
(2) which such person or any of its Affiliates or Associates has
(a) the right to acquire (whether such right is exercisable immediately
or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (b) the right to
vote pursuant to any agreement, arrangement or understanding; or
(3) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
stock of this corporation.
D. "Business Combination" shall include:
(1) any merger or consolidation of the corporation or any
Subsidiary with (i) any Interested Stockholder or (ii) any other
corporation (whether or not itself an Interested Stockholder) which is,
or after such merger or consolidation would be, an Affiliate of an
Interested Stockholder; or
(2) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to or
with any Interested Stockholder or any Affiliate of any Interested
Stockholder of any assets of the corporation or any Subsidiary having an
aggregate Fair Market Value of 10% of the total value of the assets of
the corporation reflected in the most recent balance sheet of the
corporation; or
(3) the issuance or transfer by the corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of
the corporation or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an aggregate Fair
Market Value of 20% of shareholders' equity or more; or
(4) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by or on behalf of any
Interested Stockholder or any Affiliate of any Interested Stockholder;
except that this provision shall not limit the right of the stockholders
to elect voluntarily to wind up or dissolve the corporation by the vote
of stockholders holding shares of stock representing more than 50% of
the stock then entitled to vote in the election of directors; or
(5) any reclassification of the corporation's securities
(including any reverse stock split), or recapitalization of the
corporation, or any merger or consolidation of the corporation with any
of its Subsidiaries or any other transaction (whether or not with or
into or otherwise involving any Interested Stockholder) which has the
effect, directly or indirectly, of increasing the proportionate
beneficial ownership of any Interested Stockholder or any Affiliate of
any Interested Stockholder in the outstanding shares of any class of
equity or convertible securities of the corporation or any Subsidiary.
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E. "Affiliate," and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on February 1, 1999.
F. "Disinterested Director" means any member of the Board of Directors
who is unaffiliated with the Interested Stockholder and was a member of the
Board of Directors prior to the time that the Interested Stockholder became an
Interested Stockholder, and any successor of a Disinterested Director who in
unaffiliated with the Interested Stockholder and is recommended to succeed a
Disinterested Director by a majority of Disinterested Directors then on the
Board of Directors.
G. "Fair Market Value" means, (i) in the case of stock, (A) the average
of the last reported sale price per share of the Common Stock on the NASDAQ
National Market, or any similar system of automated dissemination of quotations
of securities prices then in common use, if so quoted, for ten (10) consecutive
Trading Days (as defined below) preceding the date of such computation, or (B)
if not quoted as described in clause (A), the mean between the high bid and low
asked quotations for the Common Stock as reported by the National Quotation
Bureau Incorporated if at least two securities dealers have inserted both bid
and asked quotations for the Common Stock on at least 15 of the 30 preceding
Trading Days, or (C) if the Common Stock is listed or admitted for trading on
any national securities exchange, the last reported sale price, or the closing
bid price if no sale occurred, of the Common Stock on the principal securities
exchange on which the Common Stock is listed, or (D) if no such quotations are
available, the fair market value on the date in question of a share of such
stock as determined in good faith by a majority of the Disinterested Directors
(or if there are no Disinterested Directors, then by a majority of the Board of
Directors), and (ii) in the case of property other than cash or stock, the fair
market value of such property on the date in question as determined in good
faith by a majority of the Disinterested Directors (or if there are no
Disinterested Directors, then by a majority of the Board of Directors). As used
herein, the term "Trading Days" means (x) if the Common Stock is quoted on the
NASDAQ National Market or any similar system of automated dissemination of
quotations of securities prices, days on which trades may be made on such
system, or (y) if not quoted as described in clause (x), days on which
quotations are reported by the National Quotation Bureau Incorporated, or (z) if
the Common Stock is listed or admitted for trading or any national securities
exchange, days on which such national securities exchange is open for business.
H. "Subsidiary" means 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 Interested
Stockholder, 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.
In the event of any Business Combination in which this corporation
survives, the phrase "other consideration to be received" as used in Section 1
of this Article VI shall include the shares of stock of this corporation
retained by the holders of such shares.
Section 4. A majority of the Directors shall have the power and duty to
determine for the purposes of this Article VI, on the basis of information known
to them after reasonable inquiry, (A) whether a person is an Interested
Stockholder, (B) the number of shares of stock of this corporation beneficially
owned by any person, (C) whether a person is an Affiliate or Associate of
another, or (D) whether the assets which are the subject of any Business
Combination constitute substantially all assets of this corporation. A majority
of the Directors shall have the further power to interpret all of the terms and
provisions of this
Article VI.
Section 5. Nothing contained in this Article VI shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
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Section 6. Notwithstanding any other provisions of these articles of
incorporation or the by-laws (and notwithstanding the fact that a lesser
percentage may be specified by law, the articles of incorporation or the
by-laws) the affirmative vote of the holders of 66-2/3% or more of the
outstanding stock of this corporation, and if there is an Interested
Stockholder, the affirmative vote of holders of a majority of the outstanding
stock excluding shares held by the Interested Stockholder shall be required to
amend, repeal or adopt any provisions inconsistent with this Article VI.
VII
Section 1. Any action required to be taken at any annual or special
meeting of shareholders of this corporation, or any action which may be taken at
any annual or special meeting of shareholders, may be taken without a meeting
and without prior notice, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted, provided that the Board of Directors of this corporation, by
resolution, shall have previously approved any such action.
Section 2. Notwithstanding any other provisions of these articles of
incorporation or the by-laws (and notwithstanding the fact that a lesser
percentage may be specified by law, the articles of incorporation or the
by-laws) the affirmative vote of the holders of 66-2/3% or more of the
outstanding stock of this corporation shall be required to amend, repeal or
adopt any provisions inconsistent with this Article VII.
3. The foregoing amendment and restatement of articles of incorporation
has been duly approved by the Board of Directors.
4. The foregoing amendment and restatement of articles of incorporation
has been duly approved by the required vote of shareholders in accordance with
Section 902 of the Corporations Code. The total number of outstanding shares of
the corporation is 2,690,103. The number of shares voting in favor of the
amendment equaled or exceeded the vote required.
The percentage vote required was more than 50%.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of our own knowledge.
Date: April 21, 1999
/s/ Russell L. Duclos
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Russell L. Duclos, President
/s/ Linda J. Miles
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Linda J. Miles, Chief Financial Officer
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