<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
BAY COMMERCIAL SERVICES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
PRELIMINARY DRAFT
APRIL 12, 1996
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 28, 1996
2:30 o'clock P.M.
Dear Shareholder:
The Annual Meeting of Shareholders of Bay Commercial Services, a
California corporation and bank holding company for Bay Bank of Commerce, will
be held at Strizzi's Restaurant, 1376 East 14th Street, San Leandro, California
on Tuesday, May 28, 1996 at 2:30 p.m.
The Annual Meeting of Shareholders will be held for the following
purposes:
1. To elect Directors;
2. To consider and vote upon a proposal to readopt Article EIGHTH
of the Company's Articles of Incorporation which requires that
certain business combinations be approved by the holders of
66-2/3% of the outstanding shares unless approved by a
majority of disinterested directors, certain minimum price
requirements are met or state regulatory authorities having
jurisdiction over the matter have approved the fairness of the
proposed transaction;
3. To ratify the appointment of Deloitte & Touche as the
Company's independent public accountants; and
4. To transact such other business as may properly come before
the meeting.
The names of the Board of Directors' nominees to be Directors of Bay
Commercial Services are set forth in the accompanying Proxy Statement and are
incorporated herein by reference.
The Bylaws of Bay Commercial Services provide for the nomination of
directors in the following manner:
Nomination for election of members of the Board of Directors may be
made by the Board of Directors or by any shareholder of any outstanding class of
capital stock of the corporation entitled to vote for the election of directors.
Notice of intention to make any nominations shall be made in writing and shall
be delivered or mailed to the President of the corporation not less than
twenty-one (21) days nor more than sixty (60) days prior to any meeting of
shareholders called for the election of directors; provided however, that if
less than twenty-one (21) days' notice of the meeting is given to shareholders,
such notice of intention to nominate shall be mailed or delivered to
<PAGE> 3
the President of the corporation not later than the close of business on the
tenth day following the day on which the notice of the meeting was mailed;
provided further, that if notice of such meeting is sent by third-class mail as
permitted by Section 6 of the Bylaws, no notice of intention to make nominations
shall be required. Such notification shall contain the following information to
the extent known to the notifying shareholder: (a) the name and address of each
proposed nominee; (b) the principal occupation of each proposed nominee; (c) the
number of shares of capital stock of the corporation owned by each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the corporation owned by the
notifying shareholder. Nominations not made in accordance herewith may, in the
discretion of the Chairman of the meeting, be disregarded and upon the
Chairman's instructions, the inspectors of election can disregard all votes cast
for each such nominee.
Only shareholders of record at the close of business on April 5, 1996
are entitled to notice of and to vote at this meeting and any adjournments
thereof.
By Order of the Board of Directors,
Randall D. Greenfield, Secretary
San Leandro, California
April 26, 1996
PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN
THE ENCLOSED POST-PAID ENVELOPE.
<PAGE> 4
Mailed to shareholders
on or about April 26, 1996
PROXY STATEMENT
OF
BAY COMMERCIAL SERVICES
1495 EAST 14TH STREET
SAN LEANDRO, CALIFORNIA 94577
(415) 357-2265
INFORMATION CONCERNING THE SOLICITATION
VOTE BY PROXY
This Proxy Statement is furnished in connection with the solicitation
of the enclosed Proxy by, and on behalf of, the Board of Directors of Bay
Commercial Services, a California corporation and bank holding company (the
"Company") for Bay Bank of Commerce (the "Bank"), for use at the 1995 Annual
Meeting of Shareholders of the Company to be held at Strizzi's Restaruant, 1376
East 14th Street, San Leandro, California at 2:30 o'clock p.m. on Tuesday, May
28, 1996 and at all adjournments thereof (the "Meeting").
Any person giving a Proxy in the form accompanying this Proxy Statement
has the power to revoke it prior to its exercise. It is revocable prior to the
Meeting by an instrument revoking it or by a duly executed Proxy bearing a later
date delivered to the Secretary of the Company. Such Proxy is also revoked if
the shareholder is present at the Meeting and elects to vote in person.
Unless contrary instructions are indicated on the Proxy, all shares
represented by valid Proxies received pursuant to this solicitation (and not
revoked before they are voted) will be voted as follows:
FOR the election of all nominees for director named herein;
FOR the amendment to the Company's Articles of Incorporation to readopt
and renew Article EIGHTH of the Company's Articles of Incorporation;
and
FOR ratification of the selection of Deloitte & Touche as the Company's
independent public accountants.
In the event a shareholder specifies a different choice on the Proxy,
his or her shares will be voted in accordance with the specification so made. In
addition, such shares will, at the Proxy holders' discretion, be voted on such
other matters, if any, which may come before the Meeting (including any proposal
to adjourn the Meeting). Under SEC rules, boxes and a designated blank space are
provided on the proxy card for shareholders to mark if they wish either to
abstain on one or more of the proposals or to withhold authority to vote for one
or more nominees for director.
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 1995 accompanies this Proxy Statement. Additional copies of the
Annual Report are available upon request of Randall D. Greenfield, Chief
Financial Officer and Secretary of the Company. THE COMPANY'S ANNUAL REPORT TO
THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-KSB MAY BE OBTAINED BY ANY
SHAREHOLDER OF THE COMPANY, WITHOUT CHARGE, BY WRITING TO RANDALL D. GREENFIELD,
CHIEF FINANCIAL OFFICER, BAY COMMERCIAL SERVICES, 1495 EAST 14TH STREET, SAN
LEANDRO, CALIFORNIA 94577.
<PAGE> 5
COST OF PROXY SOLICITATION
The Company will bear the entire cost of preparing, assembling,
printing and mailing proxy materials furnished by the Board of Directors to
shareholders. Copies of proxy materials will be furnished to brokerage houses,
fiduciaries and custodians to be forwarded to the beneficial owners of the
Common Stock. In addition to the solicitation of Proxies by use of the mail,
some of the officers, directors and regular employees of the Company and the
Bank may (without additional compensation) solicit Proxies by telephone or
personal interview, the costs of which the Company will bear.
VOTE REQUIRED
The six (6) nominees receiving the greatest number of votes cast by the
holders of the Company's Common Stock entitled to vote at the Meeting will be
elected directors of the Company.
The affirmative vote of the holders of 66-2/3% of all outstanding
shares of the Company's Common Stock entitled to vote is necessary for the
amendment to the Company's Articles of Incorporation to readopt and renew
Article EIGHTH of the Company's Articles of Incorporation;
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock represented and voting at the Meeting is necessary for
the ratification of the selection of auditors.
METHOD OF COUNTING VOTES
Shareholders of the Company's Common Stock are entitled to one vote for
each share held except that for the election of directors each shareholder has
cumulative voting rights and is entitled to as many votes as shall equal the
number of shares held by such shareholder multiplied by the number of directors
to be elected and such shareholder may cast all his or her votes for a single
candidate or distribute such votes among any or all of the candidates he or she
chooses. However, no shareholder shall be entitled to cumulate votes (in other
words, cast for any candidate a number of votes greater than the number of
shares of stock held by such shareholder) unless such candidate's or candidates'
names have been placed in nomination prior to the voting, and the shareholder
has given notice at the Meeting prior to the voting of the shareholder's
intention to cumulate votes. If any shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. An
opportunity will be given at the Meeting prior to the voting for any shareholder
who desires to do so to announce his or her intention to cumulate his or her
votes. The proxy holders are given discretionary authority, under the terms of
the Proxy, to cumulate votes represented by shares for which they are named in
the Proxy.
An automated system administered by the Inspectors of Election, who are
employees of Wells Fargo Bank, N.A., the Company's independent Transfer Agent
and Registrar, will tabulate votes cast at the Meeting. Abstentions and broker
non-votes are each included in the determination of the number of shares present
and voting for the purpose of determining whether a quorum is present, and each
is tabulated separately. In determining whether a proposal has been approved,
abstentions are counted in tabulations of the votes cast on proposals presented
to shareholders and broker non-votes are not counted as votes for or against a
proposal or as votes present and voting on the proposal.
SHAREHOLDERS ENTITLED TO VOTE
Only shareholders of record on April 5, 1996 (the "Record Date") will
be entitled to notice of and to vote at the Meeting. At the close of business on
that date, the Company had outstanding 1,076,720 shares of its no par value
Common Stock (the "Common Stock").
-2-
<PAGE> 6
PRINCIPAL SHAREHOLDERS
As of the Record Date no person or group known to the Company owned
beneficially more than five percent (5%) of the outstanding shares of its Common
Stock except as described below:
<TABLE>
<CAPTION>
Amount and Nature of Percentage of Outstanding
Name and Address of Beneficial Owner Beneficial Ownership Shares Beneficially Owned
- ------------------------------------ -------------------- -------------------------
<S> <C> <C>
Joshua Fong, O.D. 61,324(1) 5.62%(1)
1652 Daily Court
San Leandro, CA 94577
Patrick Hopper 82,000 7.62%
350 East Desert Inn Road
Las Vegas, NV 89109
Richard M. Kahler 152,777(2) 13.04%(2)
1495 East 14th Street
San Leandro, CA 94577
William E. Peluso 96,244(3) 8.84%(3)
30 Marina
San Leandro, CA 94574
Bay Commercial Services 140,544(4) 13.05%(4)
Employee Stock Ownership Plan
</TABLE>
- ---------------
(1) Includes 4,545 shares in Dr. Fong's KEOGH account and 14,000 shares
subject to exercisable options under the Bay Commercial Services 1994
Stock Option Plan (the "1994 Stock Option Plan").
(2) Includes 2,176 shares held in an Individual Retirement Account
belonging to Mr. Kahler, 1,079 shares held in an Individual Retirement
Account belonging to Mr. Kahler's wife, 22,953 shares allocated as of
December 31, 1995 to Mr. Kahler's account pursuant to the Bay
Commercial Services Employee Stock Ownership Plan (the "ESOP"), 254
unallocated shares held by the ESOP (see note (4) below) and 94,500
shares subject to options which are presently exercisable under the Bay
Commercial Services 1982 Amended and Restated Stock Option Plan (the
"1982 Stock Option Plan").
(3) Includes 42,997 shares held in the name of the Pel Mar Inc. Defined
Benefit Pension Plan and 12,200 shares subject to options which are
presently exercisable under the 1994 Stock Option Plan.
(4) Shares allocated to a participant's account in the ESOP may be voted by
the participant. The ESOP Administrative Committee is authorized
pursuant to the ESOP to vote any unallocated shares of Company Common
Stock held by the ESOP. As of December 31, 1995, there were 254
unallocated shares of Company Common Stock held by the ESOP.
-3-
<PAGE> 7
PROPOSAL NO. 1
ELECTION OF DIRECTORS OF THE COMPANY
The Bylaws of the Company provide a procedure for nomination for
election of members of the Board of Directors, which procedure is printed in
full in the Notice of Annual Meeting of Shareholders accompanying this Proxy
Statement. Nominations not made in accordance therewith may be disregarded by
the Chairman of the Meeting and, upon his or her instruction, the inspectors of
election may disregard all votes cast for such nominee(s).
The authorized number of directors to be elected at the Meeting is six
(6). Each director will hold office until the next Annual Meeting of
Shareholders and until his successor is elected and qualified.
All Proxies will be voted "FOR" the election of the following six (6)
nominees, all of whom are incumbent directors, recommended by the Board of
Directors, unless authority to vote for the election of directors is withheld.
If any of the nominees should unexpectedly decline or be unable to act as a
director, the Proxies may be voted for a substitute nominee to be designated by
the Board of Directors: JOSHUA FONG, O.D., WILLIAM R. HENSON, RICHARD M. KAHLER,
DIMITRI V. KOROSLEV, WILLIAM E. PELUSO, and OSWALD "OZZIE" A. RUGAARD. The Board
of Directors has no reason to believe that any nominee will become unavailable
and has no present intention to nominate persons in addition to or in lieu of
those named above.
The following table sets forth certain information with respect to the
directors of the Company, as well as all directors and officers of the Company
as a group. All of the shares shown in the following table are owned both of
record and beneficially and the person named possesses sole voting power, except
as otherwise indicated in the notes to the table.
<TABLE>
<CAPTION>
Positions and Shares Beneficially
Directors Offices Held Director Owned as of the Record Date
-----------------------------------
and Nominees Age With the Company Since Amount Percent of Class
- ------------ --- ---------------- -------- ------ ----------------
<S> <C> <C> <C> <C>
Joshua Fong, O.D. 72 Chairman of the Board 1983 61,324(1) 5.62%
and Director
William R. Henson 71 Director 1983 14,254(2) 1.31%
Richard M. Kahler 60 President, Chief 1983 152,777(3) 13.04%
Executive Officer
and Director
Dimitri V. Koroslev 50 Director 1985 39,210(4) 3.60%
William E. Peluso 82 Director 1986 96,244(5) 8.84%
Oswald (Ozzie) 65 Director 1987 15,807(6) 1.45%
A. Rugaard
All directors and
officers of the
Company as a group
(8 in number) 429,344(7) 33.95%
</TABLE>
- ---------------------------
(Notes appear on next page.)
-4-
<PAGE> 8
(1) See note (1) to "Principal Shareholders."
(2) Includes 13,765 shares subject to exercisable options under the 1994
Stock Option Plan and 254 unallocated shares held by the ESOP (see note
(4) to "Principal Shareholders").
(3) See note (2) to "Principal Shareholders."
(4) Includes 13,485 shares held in an Individual Retirement Account
belonging to Mr. Koroslev, 3,122 shares held in an Individual
Retirement Account belonging to Denise N. Koroslev, 698 shares held by
Denise Koroslev, and 80 shares held by Dimitri V. and Denise N.
Koroslev as custodians for Heather J. and Vasily D. Koroslev. Also
includes 12,800 shares subject to exercisable options under the 1994
Stock Option Plan.
(5) See note (3) to "Principal Shareholders."
(6) Includes 11,600 shares subject to exercisable options under the 1994
Stock Option Plan.
(7) Includes 74,895 shares subject to exercisable options under the 1994
Stock Option Plan and 113,175 shares subject to options which are
exercisable under the Company's 1982 Amended and Restated Stock Option
Plan. Also includes 140,290 shares allocated as of December 31, 1995
pursuant to the ESOP.
The following table sets forth certain information with respect to the
executive officers(1) of the Company:
<TABLE>
<CAPTION>
Positions Held With the Company Officer of the
Name Age the Company and the Bank Company Since
- ---- --- ------------------------------- -------------
<S> <C> <C>
Richard M. Kahler 60 President and Chief Executive Officer 1983
of the Company and the Bank
Randall D. Greenfield 47 Vice President, Chief Financial 1983
Officer and Secretary of the Company;
Senior Vice President, Chief Administrative
Officer and Secretary of the Bank
Robert A. Perantoni 62 Senior Vice President and Senior 1993
Loan Officer of the Bank
</TABLE>
- ------------------------
(1) As used throughout this Proxy Statement, the term "executive officer"
means the president, any vice president in charge of a principal
business unit or function, any other officer or person who performs a
policy making function for the Company, and any executive officer of
the Company's subsidiaries who performs policy making functions for the
Company.
Each executive officer serves on an annual basis and must be selected
by the Board of Directors annually pursuant to the Bylaws of the Company or the
Bank.
The following information with respect to the principal occupation and
employment of each director and executive officer, the principal business of the
corporation or other organization in which such occupation and employment is
carried on, and in regard to other affiliations and business experience during
the past five (5) years, has been furnished to the Company by the respective
directors and executive officers. Except for the Bank, none of the corporations
or organizations discussed below is an affiliate of the Company.
JOSHUA FONG, O.D. is the Chairman of the Board of Directors of the
Company and is and has been a practicing optometrist since 1952. Dr. Fong is the
President of the Personnel Relations Board of the City of San Leandro. Dr. Fong
has been a partner in the Castro Valley Optometry Group since 1989 and has been
a consultant to the San Leandro Optometry Group since 1993. Dr. Fong has been a
Director of the San Leandro Chamber of Commerce, a trustee of Humana Hospital of
San Leandro and of the Oakland Chinese Presbyterian Church, the President of the
San Leandro Breakfast Club, Kiwanis Club of East Oakland and the Wa-Sung Service
Club. He
-5-
<PAGE> 9
is a member of the Alameda-Contra Costa Counties Optometric Society, the
California Optometric Society and the American Optometric Society.
RANDALL D. GREENFIELD is Vice President, Chief Financial Officer and
Secretary of the Company and Senior Vice President, Chief Administrative Officer
and Secretary of the Bank. Prior to joining the Bank in 1981, he served as
Cashier-Treasurer of Centennial Bank in Hayward, California after joining that
Bank as Controller in 1977. Mr. Greenfield worked with the First State Bank of
Northern California in San Leandro in 1974 and 1975 in Bank Operations and as
the Assistant Auditor. Mr. Greenfield is a graduate of the University of
Washington in Seattle. He is a past Director and Treasurer of the San Leandro
Boys and Girls Club and past President of the Golden Gate Chapter of the Bank
Administration Institute.
WILLIAM R. HENSON is Chairman of the Board of the Bank. He is and has
been since 1963 the President of Superior Home Loans, a California loan
brokerage firm, and of Superior Financial Services, a personal property
brokerage firm. Mr. Henson is a former Director and past President of the
Southern Alameda County Board of Realtors, a past Director of the California
Association of Realtors and a past President of the California Independent
Mortgage Brokers Association.
RICHARD M. KAHLER is the President and Chief Executive Officer of the
Company and the Bank. Previously, Mr. Kahler served as President and Chief
Executive Officer of Centennial Bank from 1976 to 1979, when he left to organize
Bay Bank of Commerce. Prior to 1976, Mr. Kahler was a Regional Vice President of
Camino California Bank in San Francisco, and a Vice President in Lloyds
Bank-Commercial Division, in charge of Southern Alameda County. He is a member
of the San Leandro Chamber of Commerce and has served as President of the Pinole
Chamber and as a Director of the Hayward and Castro Valley Chambers. He has also
been a Vice President of the Fruitvale and Pinole Lions Clubs.
DIMITRI V. KOROSLEV has engaged in asset based lending since 1971. Mr.
Koroslev is President and director of Bay Business Credit, an asset based lender
in Walnut Creek. From 1982 until 1988 Mr. Koroslev served as Senior Vice
President/Manager of Commonwealth Financial Corporation, an asset based lender
in Walnut Creek, California. From 1980 to 1982, he was Vice President/Manager of
Foothill Capital Corp., an asset based lender. He is a Founding Director of the
Northern California Commercial Finance Conference, a trade association.
WILLIAM E. PELUSO is an East Bay restaurant consultant who has owned
numerous establishments since 1946. In 1965 he developed the Blue Dolphin
restaurant at the San Leandro Marina, as part of San Leandro Shoreline
redevelopment project. The Blue Dolphin and the San Leandro Marina have been a
focal point of community activity since that time. Mr. Peluso is past President
of the Shoreline Business Association (1965-73) and the Southern Alameda County
Restaurant Association (1975-83). He is a Director of the San Leandro Boys Club
and has served as a Director of the San Leandro Chamber of Commerce. Mr. Peluso
currently serves on the Oakland Coliseum Task Force. He is a member of the Elks
and the Native Sons of California.
ROBERT A. PERANTONI is the Senior Vice President and Senior Lending
Officer of the Bank. Previously, Mr. Perantoni was a Vice President at Sanwa
Bank, from 1963 to 1993.
OSWALD (OZZIE) A. RUGAARD is an independent sales consultant since 1995
and serves in such capacity for Bay Airgas. He also serves on the Welding
Advisory Board of Chabot College, Las Positas College, and Hayward Area Eden
ROP. He was a Sales Manager for Middleton Bay Airgas in 1994 and was the
President and Sales Manager of Middleton Welder's Supply Company in San Leandro
from 1948 to 1993. He was President of the San Leandro Chamber of Commerce in
1984, President of San Leandro Manufacturer's Association in 1970 and 1976, past
Director of San Leandro Rotary Club, a trustee of Humana Hospital of San Leandro
and past President of the Independent Welder's Association.
No director or executive officer of the Company has any family
relationship with any other director or executive officer of the Company.
-6-
<PAGE> 10
No director of the Company is a director of any other company with a
class of securities registered pursuant to section 12 or subject to the
requirements of section 15(d) of the Securities Exchange Act of 1934, as
amended, or of any company registered as an investment company under the
Investment Company Act of 1940, as amended.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has established a standing Audit
Committee, with Dimitri V. Koroslev as Chairman, Joshua Fong, Oswald Rugaard,
William R. Henson and William E. Peluso as members.
The Audit Committee met two (2) times during 1995. The functions of the
Audit Committee are: (1) to recommend the appointment of and to oversee a firm
of independent certified public accountants whose duty is to audit the books and
records of the Company and the Bank for the fiscal year for which they are
appointed; (2) to monitor and recommend accounting policies to the Boards of
Directors; (3) to monitor and analyze the results of internal and regulatory
examinations; (4) to monitor the Company's and the Bank's financial and
accounting procedures and financial reporting; and (5) to assure compliance with
applicable legal and regulatory requirements with respect to audit committee
functions, internal controls, management and auditor reporting.
The Company does not have a nominating or compensation committee. The
Board of Directors of the Company performs the functions of these committees.
The Board of Directors of the Company met twelve (12) times during
1995. All directors of the Company attended at least 75% of the meetings of the
Board of Directors and the meetings of committees on which each director served.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. To the best knowledge of the Company, there are no greater than
ten-percent holders of the Company's Common Stock except for President and Chief
Executive Officer Richard M. Kahler and the Company's ESOP.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, for fiscal year 1995, the
officers and directors of the Company complied with all applicable filing
requirements, except that director William E. Peluso failed to file a Report of
Changes in Beneficial Ownership on Form 4 to report one transaction in
securities, which was subsequently reported during 1996.
-7-
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table sets forth a summary of the compensation paid
during the Company's past three fiscal years for services rendered in all
capacities to Richard M. Kahler, President and Chief Executive Officer of the
Company, Randall D. Greenfield, Vice President and Chief Financial Officer of
the Company and Robert Perantoni, Senior Vice President and Senior Lending
Officer of the Bank, the only executive officers of the Company whose annual
base compensation and bonus exceeded $100,000 during the Company's 1994 fiscal
year.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual compensation
Long term
Other annual compensation All other
Name and principal Year Salary ($) Bonus ($) compensation Awards/Securities compensation
position ($)(1) Underlying ($)
Options (#)
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
RICHARD M. KAHLER, 1995 $152,295 $ 55,596 $ 784 0 $ 47,625(2)
President and C.E.O
- --------------------------------------------------------------------------------------------------------------------------
1994 $139,603 $ 32,709 $ 807 0 $ 8,447
- --------------------------------------------------------------------------------------------------------------------------
1993 $130,662 $ 20,768 $ 1,650 0 $ 13,381
- --------------------------------------------------------------------------------------------------------------------------
RANDALL D. GREENFIELD, 1995 $ 99,043 $ 27,798 $ 6,600 0 $ 16,665(3)
Vice President and
C.F.O
- --------------------------------------------------------------------------------------------------------------------------
1994 $ 85,910 $ 16,355 $ 6,600 1,325 $ 7,663
- --------------------------------------------------------------------------------------------------------------------------
1993 $ 86,083 $ 12,780 $ 6,788 0 $ 8,338
- --------------------------------------------------------------------------------------------------------------------------
ROBERT PERANTONI, 1995 $ 97,000 $ 27,798 $ 4,141 0 $ 13,175 (4)
Senior Vice President
and Senior Lending
Officer
- --------------------------------------------------------------------------------------------------------------------------
1994 $ 89,000 $ 16,355 $ 4,173 15,000 $ 4,176
- --------------------------------------------------------------------------------------------------------------------------
1993 $ 32,856 $ 0 $ 1,500 0 $ 1,371
==========================================================================================================================
</TABLE>
(1) Consisting of the dollar value of the use of a Company automobile or
paid auto allowance.
(2) Includes (for 1995) the cash value of shares allocated to Mr. Kahler's
account in the ESOP ($19,610), $4,620 contributed by the Company to Mr.
Kahler's account in the Company's 401(k) Plan, $21,200 in directors'
fees paid by the Bank and the Company and $2,195 in term life insurance
payments made by the Company on behalf of Mr. Kahler.
(3) Includes (for 1995) the cash value of shares allocated to Mr.
Greenfield's account in the ESOP ($13,736), $2,755 contributed by the
Company to Mr. Greenfield's account in the Company's 401(k) Plan, and
$174 in life insurance premium payments made by the Company on behalf
of Mr. Greenfield.
(4) Includes (for 1995) the cash value of shares allocated to Mr.
Perantoni's account in the ESOP ($9,639), $2,834 contributed by the
Company to Mr. Perantoni's account in the Company's 401(k) Plan and
$702 in life insurance premium payments made by the Company on behalf
of Mr. Perantoni.
-8-
<PAGE> 12
OPTION GRANTS AND EXERCISES
STOCK OPTION GRANTS
The Company has established the 1994 Stock Option Plan (the "1994
Plan"), which was approved by the Company's shareholders at the 1994 Annual
Meeting of Shareholders. No grants of options were made to the executive
officers of the Company and the Bank during fiscal year 1995. During 1995, the
Company granted options to purchase a total of 18,750 shares of Common Stock to
certain non-executive employees at an exercise price of $7.875.
STOCK OPTION EXERCISES
No stock options outstanding under the Company's former 1982 Amended
and Restated Stock Option Plan (the "1982 Plan") or the 1994 Plan were exercised
by any executive officer of the Company during the Company's 1995 fiscal year.
The following table shows the value at December 31, 1995 of unexercised options
held by the named executive officers of the Company under the 1982 Plan and the
1994 Plan:
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
<CAPTION>
Number of
securities
underlying Value of
unexercised options unexercised in-the-
at fiscal year-end money options at
(#) fiscal year-end ($)
Name Shares Value Realized exercisable/ exercisable/
acquired on ($) unexercisable unexercisable
exercise (#)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard M. Kahler -0- -0- 94,500/0 $295,312/$0(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Randall D. Greenfield -0- -0- 18,940/1,060 $59,485/$4,505(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Robert Perantoni -0- -0- 5,000/10,000 $21,250/$42,500(1)
====================================================================================================================================
</TABLE>
(1) Based on a bid price per share at December 31, 1995 of $8.50.
DIRECTOR COMPENSATION
The Company pays directors' fees at the rate of $100 for each regular
meeting of the Board of Directors. The Bank pays directors' fees at the rate of
$400 for each regular meeting of the Board of Directors, $300 for each meeting
of the Loan Committee and $50 for each meeting of other committees of the Bank's
Board of Directors. Accordingly, aggregate directors' fees in the amount of
$9,950 and $129,550 were paid by the Company and the Bank, respectively,
during 1995.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no material transactions since January 1, 1995, nor are
there any currently proposed transactions, to which the Company or any of its
subsidiaries was or is to be a party, in which the amount involved exceeds
$60,000 and in which any director, executive officer, five-percent shareholder
or any member of the immediate family of any of the foregoing persons had, or
will have, a direct or indirect material interest.
-9-
<PAGE> 13
INDEBTEDNESS OF MANAGEMENT
Some of the directors and executive officers of the Company and members
of their immediate families and the companies with which they have been
associated have been customers of, and have had banking transactions with, the
Bank in the ordinary course of the Bank's business since January 1, 1995, and
the Bank expects to have such banking transactions in the future. All loans and
commitments to lend included in such transactions were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and, in the opinion of the
Bank, did not involve more than the normal risk of collectability or present
other unfavorable features.
PROPOSAL NO. 2
READOPTION OF ARTICLE EIGHTH OF THE ARTICLES OF
INCORPORATION ADDING FAIR PRICE PROVISIONS
REGARDING CERTAIN BUSINESS COMBINATIONS
This proposal would readopt and renew Article EIGHTH of the Company's
Articles of Incorporation. Article EIGHTH contains certain "fair price"
provisions which are designed to achieve a measure of assurance that any
multistep attempt by a five percent (5%) or more shareholder to acquire the
Company is made on terms that offer similar treatment to all shareholders. This
proposal will not impede an acquisition of the Company that is approved by the
directors of the Company who are not associated with the shareholder proposing
such transaction, is approved by a state regulatory authority having
jurisdiction over the transaction or that provides to all shareholders
substantially the same consideration for their shares.
INTRODUCTION
The Board of Directors, by unanimous vote at its March 19, 1996
meeting, approved and is recommending to the shareholders for approval at the
1996 Annual Meeting a proposal to readopt and renew Article EIGHTH of the
Company's Articles of Incorporation. At the Company's 1989 Annual Meeting the
shareholders approved "PROPOSAL NO. 4 - AMENDMENT TO ADD FAIR PRICE PROVISIONS
REGARDING CERTAIN BUSINESS COMBINATIONS" in which the addition of Article EIGHTH
was proposed and, subsequently, on June 8, 1989, Article EIGHTH was added to the
Company's Articles of Incorporation. At its Annual Meetings of Shareholders in
1991 and 1993, the shareholders of the Company approved proposals to renew
Article EIGHTH.
Under California law, any amendment of a corporation's articles of
incorporation which, like Article EIGHTH, includes a requirement that specified
corporate actions be approved by a larger proportion of the outstanding shares
than a majority, ceases to be effective two years after the amendment first
became effective, unless the requirement is renewed by readopting the amendment
of the corporation's articles of incorporation.
The text of Article EIGHTH is set forth in APPENDIX A to this Proxy
Statement. The information set forth below describing the proposal to renew the
amendment is qualified in its entirety by reference to APPENDIX A. Shareholders
are encouraged to read the following information and APPENDIX A carefully.
The Board of Directors of the Company believes that the reasons set
forth in the Proxy Statement for the Company's 1989 Annual Meeting recommending
adoption of Article EIGHTH continue to be valid. In order to discharge their
obligations to the Company and its shareholders, the Company's Directors must
have the ability to evaluate any attempt to take over the Company or accumulate
a significant block of its shares in an atmosphere of calm and careful
deliberation. The Board of Directors believes that renewal of Article EIGHTH,
together with the other provisions approved by the Company's shareholders at the
1989 Annual Meeting (which other provisions are not subject to similar
provisions causing them to cease to be effective after a specified period of
time), will contribute to that ability. In addition, the Board believes that
fair and equitable treatment of all shareholders in the
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<PAGE> 14
event of a two-tier tender offer or stock accumulation program which concludes
in a repurchase of its shares by the Company continues to be critical.
The general purpose of Article EIGHTH is to help assure shareholders of
the Company fair and equitable treatment in the event of a takeover attempt, to
ensure that all shareholders are afforded the opportunity to discuss fully
matters which affect their rights, to promote continuity and stability in the
Company's business, management and policies and to increase the Company's
financial flexibility. Readoption of Article EIGHTH may also increase the
ability of the Board of Directors, in such an event, to take sufficient time to
review the proposal and possible alternatives. Article EIGHTH is also intended
to encourage any party seeking to acquire control of the Company to negotiate
directly with the Company's Board of Directors.
The proposal to readopt and renew Article EIGHTH is not being made in
response to any specific effort of any person or group of which the Company is
aware to accumulate the Company's securities or to obtain control of the
Company.
Article EIGHTH does not and will not impede a takeover that is approved
by directors of the Company not affiliated with a substantial shareholder or in
which all shareholders receive substantially the same price for their shares. It
does, however, make the acquisition and exercise of control of the Company and
the removal of incumbent officers and directors more difficult and renewal of
the provision will therefore continue to enhance the ability of such officers
and directors to retain their positions. Nevertheless, the Board of Directors
continues to believe that renewal of Article EIGHTH will help provide fairer
treatment for all shareholders in the event of an actual or threatened attempt
to acquire control of the Company.
In addition to Article EIGHTH, during 1989 the Company added three
other articles to its Articles of Incorporation, all of which were approved at
the 1989 Annual Meeting of Shareholders, which may also be viewed as
anti-takeover devices. First, Article SIXTH was added to require the Board of
Directors to consider certain nonmonetary factors, in addition to financial
factors, when evaluating merger and certain other proposals. Second, Article
SEVENTH was added to prevent shareholder action by written consent without Board
approval. Finally, Article NINTH was added to require the approval of a majority
of the outstanding shares held by disinterested shareholders to authorize
certain share repurchases from certain holders of 5% or more of the Company's
voting stock. The Board of Directors does not believe that the Articles or
Bylaws of the Company currently contain any other provisions which should be
viewed as anti-takeover devices, except for the procedure for nomination for
election of members of the Board of Directors, which procedure is printed in
full in the Notice of Annual Meeting of Shareholders accompanying this Proxy
Statement. The Board of Directors has no present intention of soliciting
shareholder approval of any proposals, other than as described in this Proxy
Statement, relating to a possible acquisition of control of the Company.
Shareholders will not be entitled to exercise dissenters' rights as the result
of the adoption of the proposed amendment discussed herein.
Article EIGHTH is permitted under applicable provisions of California
law. If the readoption of Article EIGHTH is approved by the shareholders, it
will become effective on the date on which an appropriate Certificate of
Amendment of the Company's Articles of Incorporation is filed in the office of
the Secretary of State of the State of California. The Company presently intends
to make such filing immediately following the 1996 Annual Meeting. Minor
adjustments may be made to the language proposed in APPENDIX A if requested by
the California Secretary of State.
The readoption of Article EIGHTH may make certain business combinations
opposed by the incumbent Board of Directors more difficult to effect. The
adoption of the proposal may discourage certain speculative accumulations of the
Company's stock and related fluctuations in market price, thereby depriving some
shareholders of an opportunity to sell their shares at a temporarily higher
market price. Nevertheless, the Board believes that the benefits of the proposal
outweigh any disadvantages it might have. Similar proposals have been adopted by
many publicly held companies in recent years because of their favorable aspects.
The Board of Directors believes that the proposal is in the best interests of
the Company and its shareholders and recommends that shareholders approve the
proposal. Moreover, the Board of Directors believes that the reasons for the
original adoption of
-11-
<PAGE> 15
Article EIGHTH as set forth in the Proxy Statement for the Company's 1989
Meeting continue to be valid and, accordingly, those reasons are once again set
forth below. Article EIGHTH is referred to below as the "Fair Price Amendment."
The text of the proposed amendment is set forth in full as APPENDIX A to this
Proxy Statement. In the following discussion, capitalized terms not otherwise
defined are used as they are defined in APPENDIX A.
BACKGROUND AND REASONS FOR THE PROPOSAL
The Board has observed that certain actions, including partial tender
offers followed by business combinations involving less favorable "two-tiered"
pricing, have been employed in recent years as techniques in seeking to effect
corporate takeovers. The Board believes that such actions can be highly
disruptive to a company's business operations and can result in dissimilar
treatment of different shareholders. The proposal is being recommended by the
Board for shareholder approval as a means of mitigating the negative effects of
these kinds of actions on shareholders and increasing the ability and
flexibility of the Board to deal with unsolicited takeover proposals and,
generally, in directing the Company's business.
PURPOSES AND EFFECTS OF THE FAIR PRICE AMENDMENT
The Board believes that substantial inequities could result to the
remaining shareholders of a company which has come under the control of a large
shareholder who proceeds to accomplish a Business Combination. For example, the
terms of the Business Combination may not reflect arm's-length bargaining,
because one party dominates both sides of the negotiations. In addition, the
fact that the controlling party may solicit the votes of the remaining
shareholders on a Business Combination does not assure those shareholders that
the terms of such Business Combinations (e.g., the consideration that they will
receive for their shares) will be equal to or in as desirable a form as those
obtained by the controlling party in acquiring its controlling interest.
The Fair Price Amendment is designed to protect shareholders from an
inequitable pricing structure in a two-step acquisition. It is not designed to
prevent or discourage all tender offers for the Company or a Business
Combination in which all shareholders receive substantially the same price per
share or a Business Combination which has been approved by a majority of
Continuing Directors (as defined below) or the fairness of which has been
specifically determined by a state regulatory authority having jurisdiction over
the transaction. In addition, it will not preclude an offeror from making a
tender offer for some of the Company's outstanding shares without proposing a
Business Combination in which the remaining shares are extinguished. It will not
prevent a holder of a majority of the voting stock from exercising control over
the Company or from increasing its interest in the Company, except for the
restrictions on Business Combinations described below. Moreover, such holder
could increase its ownership of the already outstanding shares to 66-2/3% of the
voting stock to avoid application of the Fair Price Amendment.
It should be noted, however, that although the Fair Price Amendment is
designed to help assure fair treatment of all shareholders in the event of a
Business Combination, it does not provide that shareholders necessarily will
receive a price for their shares in an acquisition that they, or the Board, deem
favorable. Accordingly, renewal of the Fair Price Amendment would not preclude
the incumbent directors, or any future directors, from opposing a Business
Combination proposal, whether or not such a proposal satisfies the requirements
of the Fair Price Amendment, if they believe such proposal is not in the best
interests of the Company and its shareholders. Similarly, the Fair Price
Amendment does not preclude Continuing Directors from approving a Business
Combination proposal with an Interested Shareholder that does not otherwise
satisfy the requirements of the Fair Price Amendment, if the Continuing
Directors believed such a proposal was in the Company's and the shareholders'
best interests.
The Board believes that the Fair Price Amendment will help assure that
all holders of the Company's voting stock will be treated similarly if a
Business Combination is effected. The Fair Price Amendment will not, however,
prevent a shareholder who owns (or can obtain the affirmative votes of) at least
66-2/3% of the Company's voting stock from effecting a Business Combination
involving the Company in which the equity interest of the minority
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<PAGE> 16
shareholders is eliminated. The Fair Price Amendment nevertheless may make it
more difficult to accomplish certain transactions which arguably may be
beneficial to shareholders but are opposed by the incumbent directors.
66-2/3% SHAREHOLDER VOTE REQUIRED FOR BUSINESS COMBINATIONS
At present, California law requires that any merger, consolidation,
sale of substantially all the assets of the Company, adoption of a plan of
dissolution of the Company or reclassification of securities or recapitalization
of the Company requiring amendments to the Articles must be approved by a
majority vote of the shareholders entitled to vote. Certain other transactions,
such as sales of less than substantially all the assets of the Company, certain
mergers involving a subsidiary of the Company, and reclassifications and
recapitalizations not involving any amendment to the Articles, do not require
shareholder approval.
The Fair Price Amendment would require as a precondition to the
consummation of specified Business Combination transactions with or on behalf of
an Interested Shareholder the approval by an 66-2/3% vote of the holders of the
outstanding voting stock (a "66-2/3% shareholder vote"), except in cases in
which either (i) the transaction is approved by a majority of the Continuing
Directors; (ii) the transaction is specifically determined to be fair to the
shareholders of the Company by a state regulatory authority having jurisdiction
over the transaction; or (iii) certain minimum price requirements and procedural
requirements, described below, are satisfied. If the minimum price and
procedural requirements are satisfied, the regulatory fairness determination is
made, or if the requisite approval of the Continuing Directors is given with
respect to such a transaction, then only a majority shareholder vote would be
required or, for certain transactions, as noted above, no shareholder vote would
be required. Thus, under certain circumstances, the Fair Price Amendment could
require a 66-2/3% shareholder vote in instances in which either a majority
shareholder vote or no shareholder vote is presently required under California
law.
Furthermore, since management currently holds or controls outstanding
shares which, together with exercisable options to purchase additional shares of
common stock, would allow management to control 33.79% of the then outstanding
shares, no transaction requiring the approval of 66-2/3% of the outstanding
shares could be approved if it were opposed by current management acting as a
group if all of such options were exercised.
For purposes of the Fair Price Amendment, "voting stock" refers to any
shares of the Company entitled to vote generally in the election of directors.
At present, the Common Stock is the Company's only outstanding voting stock. The
Company is authorized to issue shares of Preferred Stock without soliciting
shareholder approval, the voting (and other) rights of which will be determined
by the Board at the time of issuance and may include the right to vote generally
in the election of directors and may include more than one vote per share. If
one or more series of Preferred Stock were issued to individuals opposed to a
Business Combination, the 66-2/3% vote requirement, if applicable, could be
extremely difficult or impossible to meet. The proposed 66-2/3% shareholder vote
for a Business Combination involving an Interested Shareholder would be in
addition to any separate class vote that might in the future be accorded by the
Board to any series of Preferred Stock that might be issued and outstanding the
time such vote is submitted to shareholders. At the last three annual meetings
of shareholders of the Company, held in 1993, 1994 and 1995, approximately
69.6%, 76.7% and 74.4%, respectively, of the Common Stock (constituting all
the voting stock) was represented [TO BE PROVIDED BY COMPANY].
An "Interested Shareholder" is defined as anyone (other than the
Company or any subsidiary or employee benefit plan of the Company or any
subsidiary or any person who was a director of the Company on April 1, 1989) who
is the "Beneficial Owner" of at least 5% of the voting stock of the Company or
who is an "Affiliate" or "Associate" of any such person (as such terms are
defined in the Fair Price Amendment) or who is a member of a group which is the
Beneficial Owner of at least 5% of the Common Stock of the Company on or after
April 1, 1989. See "PRINCIPAL SHAREHOLDERS" for information regarding the
persons who owned more than 5% of the Company's Common Stock as of the Record
Date. A "Beneficial Owner" includes persons directly or indirectly
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<PAGE> 17
owning or having the right to acquire or to vote stock or acting as part of a
group for such purpose. The 5% ownership standard is the reporting threshold
under Regulation 13D of the 1934 Act.
A "Business Combination" is defined to include the following
transactions (i) a merger or consolidation of the Company or any Subsidiary with
an Interested Shareholder (or a person who is, or would thereafter be, an
Affiliate of an Interested Shareholder); (ii) the sale, lease, exchange,
mortgage, pledge, transfer, or other disposition by the Company or a Subsidiary
of assets valued in excess of one million dollars if an Interested Shareholder
is a party to the transaction; (iii) the issuance of securities of the Company
or of a Subsidiary to an Interested Shareholder (other than as part of a stock
split or dividend in which all shareholders are treated equally); or (iv) any
reclassification of securities, recapitalization of the Company, merger or
consolidation of the Company with a subsidiary, or other transaction which has
the effect, directly or indirectly, of increasing the proportion of the
outstanding shares of any class of any equity securities of the Company or a
subsidiary beneficially owned by an Interested Shareholder or as a result of
which the shareholders of the Company would cease to be shareholders of a
California corporation which included in its Articles of Incorporation
provisions comparable to the Fair Price Amendment.
A "Continuing Director" with regard to a Business Combination is
defined as any member of the Board who is not an Affiliate or Associate or, and
not a nominee of, an Interested Shareholder involved in the Business Combination
and who (i) was a director before the Interested Shareholder became an
Interested Shareholder or (ii) is a successor to such a director and is
nominated or elected as a director by a majority of the Continuing Directors on
the Board at the time of his nomination or election.
EXCEPTIONS TO 66-2/3% SHAREHOLDER VOTE REQUIREMENTS
A 66-2/3% shareholder vote would not be required for a Business
Combination (i) that has been approved by a majority of the Continuing
Directors; (ii) which has been specifically determined by a state regulatory
authority having jurisdiction over the transaction to be fair to the
shareholders; or (iii) which satisfied the minimum price requirements and
procedural requirements described below.
Minimum Price Requirements. A Business Combination involving the
payment of cash or other consideration to the Company's shareholders for all of
their shares of Common Stock will not require a 66-2/3% shareholder vote if the
payments satisfy certain requirements, described below (the "Minimum Price
Requirements"). In all cases, the Business Combination must provide for the
payment to Common Shareholders of a consideration having a fair market value on
the date the Business Combination is consummated (the "Consummation Date") at
least equal in value to the highest of the following: (i) the average fair
market value per share of Common Stock during the 90-day period prior to the
first public announcement of the Business Combination (the "Announcement Date")
or (ii) the fair market value per share of Common Stock on the last trading day
before the Announcement Date. In addition, if the Interested Shareholder became
such within 5 years of the Announcement Date, the required price would also have
to be higher than the highest per share price paid by the Interested Shareholder
(before or after becoming an Interested Shareholder) in acquiring any shares of
Common Stock during the five years prior to the Announcement Date. The fair
market value of the shares will be adjusted to reflect any stock dividend, stock
split, recapitalization, reverse stock split, reorganization or similar event
affecting the number of outstanding common shares. Payment to shareholders of
the required amount of consideration would be required to be made in cash or in
the same form as was previously paid by the Interested Shareholder involved in
the Business Combination to acquire any shares of Voting Stock beneficially
owned by the Interested Shareholder. If the Interested Shareholder beneficially
owns shares of Voting Stock which were acquired with different forms of
consideration, then shareholders could be paid either in cash or with the form
of noncash consideration used by the Interested Shareholder to acquire the
largest number of shares of Voting Stock beneficially owned by it.
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<PAGE> 18
Under the Minimum Price Requirements the Fair Market Value of any
noncash consideration to be received by holders of shares of Common Stock in a
Business Combination must be determined as of the Consummation Date. Where the
definitive terms of such noncash consideration are established in advance of the
Consummation Date, intervening adverse developments in the economy, the market
generally, the financial condition or business of the Interested Shareholder, or
otherwise, could result in a decline in the originally anticipated fair market
value of such consideration. In that event, on the date scheduled for
consummation of the Business Combination, even though the Business Combination
had not theretofore been considered as requiring a 66-2/3% shareholder vote or
approval by a majority of Continuing Directors (i.e., because it satisfied the
Procedural Requirements and was expected to satisfy the Minimum Price
Requirements), the Business Combination could not be consummated because such
vote or approval would then be required (in addition to any lesser vote
required) because the Business Combination did not, in fact, meet the Minimum
Price Requirements on such date. Thus, an Interested Shareholder who wishes to
use noncash consideration in a Business Combination in which the definitive
terms of such noncash consideration are established in advance of the
Consummation Date may not know with certainty at the time the Business
Combination is submitted to the Company's shareholders whether such
consideration will meet the Minimum Price Requirements. An Interested
Shareholder could avoid such a situation, however, by establishing, in advance,
terms for the Business Combination whereby the noncash consideration would be
determined by reference to its fair market value on the Consummation Date. Such
an approach, which has in fact been used in connection with mergers and similar
two-step transactions, requires the Interested Shareholder to bear the risk of a
decline in the actual market value of the offered consideration prior to the
consummation of the Business Combination. The Fair Price Amendment uses the
Consummation Date as the date for determining the fair market value of any cash
consideration to be paid in a Business Combination in order to assure that the
Interested Shareholder, and not the other shareholders, would bear the risk of a
decline in the value of such consideration prior to the receipt of such
consideration by the other shareholders.
Procedural Requirements. Under the Fair Price Amendment, unless the
Business Combination is approved by a majority of Continuing Directors, the
Business Combination would require approval by a 66-2/3% shareholder vote, even
if it satisfied the Minimum Price Requirements, in each of the situations
discussed below (the "Procedural Requirements"):
(1) If the Company, after the Interested Shareholder became an
Interested Shareholder, fails to pay any required dividends on any
outstanding shares of Preferred Stock or reduces the rate of dividends
last paid on its Common Stock, unless such failure or reduction is
approved by a majority of the Continuing Directors. This provision is
designed to prevent an Interested Shareholder from attempting to
depress the market price for the Company's stock prior to proposing a
Business Combination by attempting to cause the Company to fail to pay
or to reduce dividends, as the case may be, on such stock, thereby
seeking to reduce the consideration which might otherwise be payable
pursuant to the Minimum Price Requirements.
(2) If the Interested Shareholder received at any time after
it became an Interested Shareholder, whether in connection with the
proposed Business Combination or otherwise, the benefit, directly or
indirectly, of any loan or other financial assistance or tax advantages
provided by, or as a result of its equity position in, the Company,
other than proportionately as a shareholder on a basis generally
available to all shareholders. This provision is intended to deter an
Interested Shareholder from self-dealing or otherwise taking advantage
of its equity position in the Company by using the Company's resources
to finance the proposed Business Combination or otherwise for its own
purposes, in a manner not proportionately available to all
shareholders.
(3) If a proxy or information statement describing the
proposed Business Combination and complying with the disclosure and
other requirements of the rules promulgated under the 1934 Act has not
been mailed to all shareholders of the Company at least 60 days prior
to the consummation of a Business Combination, whether or not such
proxy or information statement is required to be mailed pursuant to
such Act, which statement includes the views regarding the proposed
Business Combination of the Continuing
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<PAGE> 19
Directors then in office, if any. This provision is intended to assure
that the Company's shareholders would be fully informed of the terms
and conditions of the proposed Business Combination even if the
Interested Shareholder is not otherwise legally required to disclose
such information to shareholders.
The Fair Price Amendment also includes additional provisions designed
to effectuate its purposes. Neither the Minimum Price Requirements nor the
Procedural Requirements described above would apply in the event of a Business
Combination approved by a majority of the Continuing Directors or specifically
determined by a state regulatory authority having jurisdiction over the
transaction to be fair to the shareholders. In the absence of such approval or
determination, both the Minimum Price and the Procedural Requirements would have
to be satisfied to avoid the 66-2/3% shareholder vote requirement.
66-2/3% SHAREHOLDER VOTE REQUIRED FOR CHANGES IN OR TO THE FAIR PRICE AMENDMENT
The Fair Price Amendment would require a 66-2/3% shareholder vote for
alteration, amendment, or repeal of, or adoption of any provision inconsistent
with, the Fair Price Amendment (including the requirement therein for a 66-2/3%
shareholder vote). The proposed 66-2/3% shareholder vote would be in addition to
any separate class vote that might in the future be accorded by the Board to any
series of Preferred Stock which might be outstanding at the time any such change
is submitted to shareholders.
OTHER FACTORS RELATING TO THE FAIR PRICE AMENDMENT
As discussed above, a number of companies have in the past been the
subject of tender offers for or other acquisitions of less than 66-2/3% of their
outstanding voting stock. In many cases, such purchases have been followed by
Business Combinations in which the purchasers have paid a lower price,
frequently in a less desirable form of consideration, for the remaining
outstanding shares than the price they paid in acquiring their original interest
in the target company. Federal and state securities laws and regulations govern
the disclosure required to be made to minority shareholders in such transactions
but do not assure the fairness to shareholders of the terms of the Business
Combination. California law requires that where an "interested party" (as
defined in Section 1203 of the California Corporations Code) makes a tender
offer for or a written proposal to effect certain kinds of acquisitions of
control of a California corporation, the interested party must deliver an
opinion from an unrelated party who, for compensation, engages in the business
of advising others as to the value of properties, businesses or securities, as
to the fairness of the consideration to be received by the shareholders of the
target corporation. However, California law does not impose a requirement that
the amount offered to other shareholders in such a transaction be comparable to
that paid by the controlling shareholder in acquiring his shares. While
shareholders of a company have a statutory right to dissent in connection with
certain Business Combinations and receive the fair value of their shares in cash
as determined by a court, the exercise of such right may involve significant
expense, delay and uncertainty and dissenting shareholders have no assurance
that "fair value" as determined in such a proceeding would be equivalent to the
price required under the Minimum Price Requirements of the Fair Price Amendment.
Furthermore, in the case of many Business Combinations, including sales of
assets not constituting all or substantially all of a company's assets and
reclassifications or recapitalizations of the outstanding shares of a company's
stock, the statutory right to dissent may not be available at all.
The Fair Price Amendment is intended partially to fill these gaps in
federal and state law and to prevent certain of the potential inequities of
those Business Combinations that involve two or more steps by requiring, as a
prerequisite to completion of a Business Combination that is not approved by a
majority of the Continuing Directors, that the Interested Shareholder must
either acquire (or assure itself of obtaining the affirmative votes of) at least
66-2/3% of the voting stock prior to the Business Combination or to be prepared
to meet both the Minimum Price Requirements and Procedural Requirements. The
Fair Price Amendment is also designed to protect those shareholders who have not
tendered or otherwise sold their shares to a purchaser who is attempting to
acquire
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<PAGE> 20
control and becomes an Interested Shareholder by assuring that at least as
favorable a price and form of consideration are paid to such shareholders in any
Business Combination with such Interested Shareholder during the following five
years as were paid to shareholders in the initial step of the acquisition. In
the absence of the Fair Price Amendment, an Interested Shareholder who has
acquired control of the Company could subsequently, by virtue of such control,
force minority shareholders to sell or exchange their shares at a price set by
such Interested Shareholder lower than the price paid by such Interested
Shareholder to acquire its controlling interests and which may also be in a less
desirable form (e.g., equity or debt securities of the Interested Shareholder
instead of cash).
The Board believes that the Fair Price Amendment would discourage such
inequitable two-step transactions and, instead, would have the result of
requiring that a purchaser pay shareholders a higher price for their shares,
structure the transaction differently from the terms which might otherwise be
offered absent such an amendment, or obtain a 66-2/3% shareholder vote in
approving a proposed transaction. The Board also believes that, to the extent a
Business Combination were involved as part of a plan to acquire control of the
Company, renewal of the Fair Price Amendment would increase the likelihood that
an acquirer would negotiate directly with the Board. The Board believes that it
is normally in a better position than the individual shareholders of the Company
to negotiate effectively on behalf of all shareholders in that the Board is
likely to be more knowledgeable than any individual shareholder in assessing the
business and prospects of the Company. Although not all acquisitions of a
company's shares are made with the objective of acquiring control of the Company
through a subsequent Business Combination, in many cases a purchaser desires to
have the option to consummate a Business Combination. Assuming that to be the
case, the Fair Price Amendment would tend to discourage purchasers whose
objective is to seek control of the Company at a relatively low price, since
acquiring the remaining equity interest would not be assured unless the Minimum
Price and Procedural Requirements are satisfied or a majority of the Continuing
Directors or a 66-2/3% shareholder vote has approved the transaction or the
requisite fairness determination has been made. Accordingly, the Board believes
that negotiations between the Board and any potential purchaser would increase
the likelihood that shareholders would receive a higher price for their shares
from anyone desiring to obtain control of the Company through a Business
Combination or otherwise.
POSSIBLE DISADVANTAGES
Tender offers or other non-open market acquisitions of stock are
usually made at prices above the prevailing market price of a company's stock.
In addition, acquisitions of stock by persons attempting to acquire control
through market purchases may cause the market price of the stock to reach levels
that are higher than would otherwise be the case. The Fair Price Amendment may
discourage such purchases and may therefore deprive some holders of the
Company's stock of an opportunity to sell their shares at a temporarily higher
market price.
Because of the higher percentage requirements for shareholder approval
of any subsequent Business Combination and the possibility of having to pay a
higher price to other shareholders in such a Business Combination, it may become
more costly for a purchaser to acquire control of the Company if the Fair Price
Amendment is renewed. The Fair Price Amendment may therefore decrease the
likelihood that an offer will be made for less than 66-2/3% of the voting stock
and, as a result, may adversely affect those shareholders who would desire to
participate in such an offer. A potential purchaser of stock seeking to obtain
control may also be discouraged from purchasing stock because a 66-2/3%
shareholder vote would be required in order to change or eliminate these
provisions. It should be noted that the provisions of the Fair Price Amendment
would not necessarily discourage persons who might be willing to seek control by
acquiring 66-2/3% of the voting stock without intending to acquire the remaining
33-1/3% minority.
In certain cases, the Minimum Price Requirements, while providing
objective pricing criteria, could be arbitrary and not indicative of value. In
addition, an Interested Shareholder may be unable in certain circumstances to
comply with all the Procedural Requirements of the Fair Price Amendment. In
these circumstances, unless a
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potential purchaser is willing and able to acquire at least 66-2/3% of the
voting stock as the first step in a Business Combination or obtain the voting
support needed for a 66-2/3% shareholder vote, it would be forced either to
negotiate with the Board and offer terms acceptable to it or to abandon the
proposed Business Combination.
Another effect of renewal of the Fair Price Amendment would be to give
veto power to the holders of a minority of the voting stock with respect to a
Business Combination that is opposed by the Board, but which holders of a
majority (but less than 66-2/3%) of the stock may believe to be desirable and
beneficial. Since management currently holds or controls outstanding shares
which, together with exercisable options to purchase additional shares of common
stock, would allow management to control 33.79% of the then outstanding shares,
management as a group could act collectively to block any proposal requiring an
66-2/3% vote. This could prevent the removal of current management even if such
removal was deemed beneficial by a majority (but less than 66-2/3%) of the
shares outstanding. For information regarding the Company's current significant
shareholders, see "PRINCIPAL SHAREHOLDERS." For information concerning stock
ownership by the Board of Directors and management, see "PROPOSAL NO. 2 -
ELECTION OF DIRECTORS OF THE COMPANY." In addition, since only the Continuing
Directors will have the authority to eliminate the 66-2/3% shareholder vote
required for Business Combinations (unless the Minimum Price and Procedural
Requirements are satisfied or the requisite regulatory fairness determination
has been made), the Fair Price Amendment may tend to insulate incumbent
management against the possibility of removal in the event of a takeover bid.
Conversely, if an Interested Shareholder has replaced all of the directors who
were in office on the date it became an Interested Shareholder with nominees of
its choice, there would be no Continuing Directors and, consequently, such
66-2/3% shareholder vote requirement would apply to any Business Combination
consummated subsequent to such replacement unless all the Minimum Price and
Procedural Requirements were satisfied or the requisite fairness determination
was made.
However, the Board believes that the benefits of seeking to protect
shareholders from any inequitable two-step Business Combinations outweigh any
potential disadvantages from discouraging such proposals and that it is prudent
and in the best interests of the Company and its shareholders to provide the
advantages of greater assurance of equal treatment in Business Combinations that
will result from the renewal of the Fair Price Amendment.
REQUIRED APPROVAL OF SHAREHOLDERS
California law provides that an amendment of a corporation's articles
of incorporation which, like the Fair Price Amendment, includes a supermajority
vote requirement, must be approved by at least as large a proportion of the
outstanding shares as is required pursuant to that amendment for the approval of
the specified corporate action or actions. Accordingly, since the Fair Price
Amendment in certain cases requires a 66-2/3% shareholder vote for approval of
Business Combinations, renewal of the Fair Price Amendment and readoption of
Article EIGHTH requires approval by the affirmative vote of the holders of
66-2/3% of the outstanding shares of Common Stock entitled to vote at the 1996
Annual Meeting.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL
OF PROPOSAL NO. 2 AND THE READOPTION OF ARTICLE EIGHTH TO THE COMPANY'S
ARTICLES. Proxies solicited by the Board of Directors will be voted in favor of
the amendment unless shareholders specify otherwise.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche, which served the Company and the Bank as
independent public accountants for 1995, has been selected by the Audit
Committee of the Board of Directors of the Company to be its independent
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public accountants for 1996. All Proxies will be voted "FOR" ratification of
such selection unless authority to vote for the ratification of such selection
is withheld or an abstention is noted. If the nominee should unexpectedly for
any reason decline or be unable to act as independent public accountants, the
Proxies will be voted for a substitute nominee to be designated by the Audit
Committee.
Representatives from the accounting firm of Deloitte & Touche will be
present at the Meeting [CONFIRM], will be afforded the opportunity to make a
statement if they desire to do so, and will be available to respond to
appropriate questions.
SHAREHOLDER PROPOSALS
Next year's Annual Meeting of Shareholders will be held on or about May
27, 1997. The deadline for shareholders to submit proposals to be considered for
inclusion in the Company's Proxy Statement and Form of Proxy for the 1996 Annual
Meeting of Shareholders is December 30, 1996, unless such meeting date is
changed by more than 30 calendar days in which case such proposals must be
received by a reasonable time prior to the mailing of the Proxy Statement.
OTHER PROPOSED ACTION
The Board of Directors is not aware of any other business which will
come before the Meeting, but if any such matters are properly presented, Proxies
solicited hereby will be voted in accordance with the best judgment of the
persons holding the Proxies. All shares represented by duly executed Proxies
will be voted at the Meeting.
BAY COMMERCIAL SERVICES
San Leandro, California
April 26, 1996
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<PAGE> 23
APPENDIX A
EIGHTH. Vote Required for Certain Business Combinations.
A. Definitions. For the purposes of this Article EIGHTH:
1. "Affiliate" shall mean any person who, directly or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with another person.
2. "Announcement Date" shall mean the date of the first public
announcement of a proposed Business Combination.
3. "Approved by a Majority of Continuing Directors" with
respect to any matter shall mean that such matter has been approved by
a majority vote of the members of the Board of Directors who are not
disqualified as provided in the following sentence. Persons shall be
disqualified with respect to the vote referred to in the preceding
sentence if they are not Continuing Directors.
4. "Associate" shall mean (i) with respect to a corporation or
association, any officer or director thereof or of a subsidiary
thereof, (ii) with respect to a partnership, any general partner
thereof or any limited partner thereof having a 10 percent ownership
interest in such partnership, (iii) with respect to a business trust,
any officer or trustee thereof or of any subsidiary thereof, (iv) with
respect to any other trust or an estate, any trustee, executor or
similar fiduciary and any person who has a substantial interest as a
beneficiary of such trust or estate, (v) with respect to a natural
person, the spouses and children thereof and any other relative thereof
or of the spouse thereof who has the same home, and (vi) any Affiliate
of any such person.
5. "Beneficial Owner" shall mean, as to any shares of Voting
Stock, a person:
(a) who beneficially owns, directly or indirectly,
such shares; or
(b) who has (i) the right to acquire such shares from
another person (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 (ii) the right to vote or to direct the voting
thereof pursuant to any agreement, arrangement or
understanding. For purposes of this definition, a Person shall
be deemed to own any shares and possess all rights owned or
possessed, directly or indirectly, by all of its Associates
and Affiliates or 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,
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<PAGE> 24
holding, voting or disposing of any shares of Voting Stock.
6. "Business Combination" shall mean any transaction which is
referred to in any one or more of subparagraphs 1 through 4 of
paragraph B of this Article EIGHTH.
7. "Continuing Director" shall mean any member of the Board of
Directors of this corporation who is neither an Affiliate nor an
Associate of, and not a nominee of, an Interested Shareholder involved
in a Business Combination, or an Affiliate or Associate of such
Interested Shareholder; and who (i) was a member of the Board of
Directors prior to the time that such Interested Shareholder became
such, or (ii) is a successor of such a member who was nominated to
succeed such a member by a majority of Continuing Directors then on the
Board.
8. "Determination Date" shall mean the date on which an
Interested Shareholder became such.
9. "Fair Market Value" shall mean: (a) in the case of stock,
the closing sale price on the date in question of a share of such stock
on the National Market System of the National Association of Securities
Dealers Automated Quotation System or any system then in use on any
national securities exchange or automated quotation system, or if no
such quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority of the
Continuing Directors in good faith; and (b) in the case of property
other than cash or stock, the fair market value of such property on the
date in question as determined by a majority of the Continuing
Directors in good faith.
10. "Interested Shareholder" shall mean any Person (other than
this corporation, any Subsidiary, any employee benefit plan or trust of
this corporation or a Subsidiary or any Person who on April 1, 1989 was
a director of this corporation) who or which on or after April 1, 1989:
(a) is the beneficial owner, directly or indirectly,
of more than 5% of the combined voting power of the then
outstanding Voting Stock, or is an Affiliate or Associate of
such Person; or
(b) acts with any other Person through or as a
partnership (general or limited), syndicate, or other group
for the purpose of acquiring, holding or disposing of
securities of this corporation, which entity or group is the
Beneficial Owner, directly or indirectly, of 5% of the
combined voting power of the outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded to
the beneficial ownership of any shares of Voting Stock which
were at any time within the
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two-year period immediately prior to the date in question
beneficially owned by an Interested Shareholder, unless such
assignment or succession shall have occurred pursuant to a
Public Transaction or any series of transactions involving a
Public Transaction.
Any reference to an Interested Shareholder involved in a
Business Combination shall also refer to any Affiliates or Associates
thereof, any predecessor thereto, and all members of any partnership,
syndicate or group which includes such Interested Shareholder. For
purposes of determining whether a person is an Interested Shareholder,
the number of shares of Voting Stock deemed to be outstanding shall
include shares deemed owned through application of definition 5 above
but shall not include any other shares of Voting Stock which may be
issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
11. "Person" shall mean any individual, firm, trust,
partnership, association, corporation or other entity.
12. "Public Transaction" shall mean any (a) purchase of shares
offered pursuant to an effective registration statement under the
Securities Act of 1933 or (b) open-market purchase of shares on a
national securities exchange or automated quotation system if, in
either such case, the price and other terms of sale are not negotiated
by the purchaser and the seller of the beneficial interest in the
shares.
13. "Subsidiary" shall mean any corporation of which a
majority of any class of equity security is owned, directly or
indirectly, by this corporation; provided, however, that, for the
purposes of the definition of Interested Shareholder 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.
14. "Voting Stock" shall mean stock of all classes and series
of this corporation entitled to vote generally in the election of
directors.
B. Transactions Requiring 66-2/3% Affirmative Vote. In addition to any
affirmative vote required by law, by these Articles of Incorporation, or
otherwise, and except as otherwise expressly provided in paragraph C of this
Article EIGHTH none of the following transactions shall be consummated unless
such consummation shall have been approved by the affirmative vote of the
holders of at least 66-2/3% of the combined voting power of the then outstanding
shares of Voting Stock 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, in these Articles of Incorporation
or otherwise.
1. Any merger or consolidation of this corporation or any
Subsidiary with
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(a) an Interested Shareholder or (b) any other corporation (whether or
not itself an Interested Shareholder) which is, or after such merger or
consolidation would be, an Interested Shareholder or an Affiliate or
Associate of an Interested Shareholder.
2. Any sale, lease, exchange, mortgage, pledge, grant of a
security interest, transfer or other disposition (in one transaction or
a series of transactions) directly or indirectly, to or with (a) an
Interested Shareholder or (b) any other person (whether or not itself
an Interested Shareholder) which is, or after such transaction would
be, an Affiliate or Associate of an Interested Shareholder of any of
the assets of this corporation (including, without limitation, any
voting securities of a Subsidiary) or any Subsidiary having an
aggregate Fair Market Value of one million dollars or more.
3. The issuance or transfer by this corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of this corporation or any Subsidiary, or both, to (a) an
Interested Shareholder or (b) any other person (whether or not itself
an Interested Shareholder) which is, or after such issuance or transfer
would be, an Affiliate or Associate of an Interested Shareholder,
except as part of a stock split or dividend in which all shareholders
of such class are treated equally, or on the conversion or exchange of
securities of this corporation or a Subsidiary acquired by the
Interested Shareholders in a transaction approved as herein provided.
4. Any reclassification of securities (including any reverse
stock split), or recapitalization of this corporation, or any merger or
consolidation of this corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Shareholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of this
corporation or any Subsidiary directly or indirectly beneficially owned
by (a) an Interested Shareholder or (b) any other person (whether or
not itself an Interested Shareholder) which is, or after such
reclassification, recapitalization, merger or consolidation or other
transaction would be, an Affiliate or Associate of an Interested
Shareholder; or as a result of which the shareholders of this
corporation would cease to be shareholders of a corporation
incorporated under the laws of the State of California having, as part
of its articles of incorporation, provisions to the same effect as this
Article EIGHTH.
C. Exceptions to 66-2/3% Affirmative Vote Requirement. The requirements
of paragraph B of this Article EIGHTH shall not be applicable to any particular
Business Combination, and such Business Combination shall require only such
affirmative vote as is required by law, by any other provision of these Articles
of Incorporation or otherwise, if the Business Combination shall have been
Approved by a Majority of the Continuing Directors, or if a state regulatory
authority having jurisdiction under the circumstances shall have determined
specifically, and not by implication, that the Business Combination is fair to
the holders of the Voting Stock, or if all of the following conditions (other
than those which
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<PAGE> 27
are, by their terms, inapplicable) shall have been met.
1. The transaction constituting the Business Combination shall
provide for a consideration per share to be received by all holders of
Common Stock in exchange for all of their shares of Common Stock, and
the aggregate amount of cash and the Fair Market Value as of the date
of the consummation of the Business Combination of any consideration
other than cash to be received per share by holders of Common Stock in
such Business Combination shall be at least equal to the highest of the
following:
(a) The Fair Market Value per share of Common Stock
on the last trading day before the Announcement Date.
(b) The average of the Fair Market Values of a share
of Common Stock over each trading day in the 90 calendar days
immediately prior to the Announcement Date.
(c) If the Announcement Date of such Business
Combination is within five years of the Determination Date in
respect of the Interested Shareholder involved in such
Business Combination, the highest per-share price (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by such Interested Shareholder to acquire
any shares of Common Stock which are or were at any time
within such five year period Beneficially Owned by such
Interested Shareholder and were acquired by it at any time
within such five year period. The price determination in
accordance with this subparagraph 1 and the following
subparagraph 2 of this paragraph shall be subject to
appropriate adjustment in the event of any recapitalization,
stock dividend, stock split, combination of shares or similar
event.
2. If the transaction constituting the Business Combination
shall provide for a consideration to be received by holders of any
class or series of outstanding Voting Stock other than Common Stock,
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 each
such class or series of Voting Stock shall be determined in the same
manner as provided in subparagraph 1 above.
3. The consideration to be received by holders of a particular
class or series of outstanding Voting Stock (including Common Stock)
shall be in cash or in the same form as was previously paid by the
Interested Shareholder involved in such Business Combination in order
to acquire shares of such class or series of Voting Stock which are
beneficially owned by an Interested Shareholder and, if an Interested
Shareholder beneficially owns shares of any class or series of Voting
Stock which were acquired with varying forms of consideration, the form
of consideration for such
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<PAGE> 28
class or series of Voting Stock shall be either cash or the form used
to acquire the largest number of shares of such class or series of
Voting Stock beneficially owned by it.
4. After such Interested Shareholder has become such and prior
to the consummation of such Business Combination:
(a) Except as Approved by a Majority of the
Continuing Directors, there shall have been no failure to
declare and pay at the regular dates therefor the full amount
of any dividends (whether or not cumulative) payable on any
outstanding class of stock having a preference over the Common
Stock as to dividends.
(b) There shall have been (i) no reduction in the
annual rate of dividends paid on the Common Stock (except as
necessary to reflect any subdivision of the Common Stock)
other than as Approved by a Majority of the Continuing
Directors and (ii) an increase in such annual rate of
dividends as necessary to prevent any such reduction in the
event of any reclassification (including any reverse stock
split or combination of shares), recapitalization,
reorganization or any similar transaction which has the effect
of reducing the number of outstanding shares of the Common
Stock, unless the failure so to increase such annual rate is
Approved by a Majority of the Continuing Directors.
5. After the Determination Date such Interested Shareholder
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, whether in anticipation of or
in connection with such Business Combination or otherwise.
6. 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, at this corporation's expense, be
mailed to the shareholders of this corporation, no later than the
earlier of (a) 30 days prior to any vote on the proposed Business
Combination or (b) if no vote on such Business Combination is required,
60 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). Such proxy statement
shall contain at the front thereof, in a prominent place, any
recommendations as to the advisability (or inadvisability) of the
Business Combination which have been Approved by a Majority of the
Continuing Directors and furnished in writing, and an opinion of a
reputable investment banking firm as to the fairness (or lack of
fairness) of the terms of such Business Combination, from the point of
view of the holders of
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<PAGE> 29
Voting Stock other than an Interested Shareholder if such requirement
has been Approved by a Majority of Continuing Directors, (such
investment banking firm to be Approved by a Majority of the Continuing
Directors, to be furnished with all information it reasonably requests
and to be paid a reasonable fee for its services upon receipt by this
corporation of such opinion).
D. Approval by a Majority of the Continuing Directors. The power and
duty to determine for the purposes of this Article EIGHTH, on the basis of
information known to them after reasonable inquiry, all facts necessary to
determine compliance with this Article EIGHTH, including, without limitation,
(1) whether a Person is an Interested Shareholder, (2) the number of shares of
Voting Stock beneficially owned by any Person, (3) whether a Person is an
Affiliate or Associate of another, (4) whether the requirements of paragraph C
of this Article EIGHTH have been met and (5) such other matters with respect to
which a determination is required under this Article EIGHTH shall be exercised
in a manner Approved by a Majority of Continuing Directors. The good faith
determination with respect to such Approval by a Majority of the Continuing
Directors on such matters shall be conclusive and binding for all purposes of
this Article EIGHTH.
E. No Effect on Fiduciary Obligations of Interested Shareholders.
Nothing contained in this Article EIGHTH shall be construed to relieve an
Interested Shareholder of any fiduciary obligation imposed by law.
F. Amendment, Repeal, etc. Notwithstanding any other provisions of
these Articles of Incorporation or the Bylaws of this corporation or the fact
that a lesser percentage may be specified by law, these Articles of
Incorporation or the Bylaws of this corporation, the affirmative vote of the
holders of at least 66-2/3% of the combined voting power of the then outstanding
Voting Stock, voting together as a single class, shall be required to amend,
alter, adopt any provision inconsistent with or repeal this Article EIGHTH.
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<PAGE> 30
BAY COMMERCIAL SERVICES
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1996
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE
BOARD OF DIRECTORS
The undersigned holder of Common Stock acknowledges receipt of a copy
of the Notice of Annual Meeting of Shareholders of Bay Commercial Services, and
the accompanying Proxy Statement dated April 26, 1996 and revoking any Proxy
heretofore given, hereby constitutes and appoints Richard M. Kahler, Joshua
Fong, O.D., and William R. Henson, and each of them, with full power of
substitution, as attorneys and Proxies to appear and vote all of the shares of
Common Stock of Bay Commercial Services, a California corporation and bank
holding company of Bay Bank of Commerce, standing in the name of the undersigned
which the undersigned could vote if personally present and acting at the Annual
Meeting of Shareholders of Bay Commercial Services, to be held at Strizzi's
Restaruant, 1376 East 14th Street, San Leandro, California on Tuesday, May 28,
1996 at 2:30 p.m. or at any adjournments thereof, upon the following items as
set forth in the Notice of Meeting and Proxy Statement and to vote according to
their discretion on all other matters which may be properly presented for action
at the meeting or any adjournments thereof. The above-named proxy holders are
hereby granted discretionary authority to cumulate votes represented by the
shares covered by this Proxy in the election of directors.
1. To elect as Directors the nominees set forth below.
/ / FOR all nominees listed below (except as marked to
the contrary below).
/ / WITHHOLD AUTHORITY to vote for all nominees listed
below.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
JOSHUA FONG, O.D., WILLIAM R. HENSON, RICHARD M. KAHLER, DIMITRI V.
KOROSLEV, WILLIAM E. PELUSO, OSWALD "OZZIE" A. RUGAARD.
2. To approve the proposal to renew the Fair Price Amendment (as
described in the Proxy Statement) and amend the Company's
Articles of Incorporation to include Article EIGHTH in
substantially the form attached as Exhibit A to the Proxy
Statement and incorporated therein by reference
/ / FOR / / AGAINST / / ABSTAIN
3. To approve the proposal to ratify the appointment of Deloitte
& Touche as independent public accountants for the Company's
1996 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the proxy holders are authorized to vote
upon such other business as may properly come before the
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS AND "FOR" PROPOSAL NOS. 2 AND 3.
THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
MADE, IT WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS NOMINATED BY THE BOARD OF
DIRECTORS AND "FOR" PROPOSAL NOS. 2 AND 3.
<PAGE> 31
SHAREHOLDER(S)
______________________
______________________
DATE:___________, 1996 Please date and sign exactly as your name(s) appears.
When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such.
If more than one trustee, all should sign. All joint
owners should sign. WHETHER OR NOT YOU PLAN TO ATTEND
THIS MEETING, PLEASE SIGN AND RETURN THIS PROXY AS
PROMPTLY AS POSSIBLE IN THE ENCLOSED POST-PAID
ENVELOPE.
I/We do _____ or do not _____expect to
attend this meeting.
THIS PROXY IS SOLICITED BY, AND ON BEHALF OF, THE BOARD OF DIRECTORS
AND MAY BE REVOKED BY THE SHAREHOLDER PRIOR TO ITS EXERCISE.
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