<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
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or 240.14a-12
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
</TABLE>
Foothill Independent Bancorp
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
PRELIMINARY COPY
LOGO
FOOTHILL INDEPENDENT BANCORP
March , 2000
Dear Fellow Shareholder:
On behalf of your Board of Directors and Management, you are cordially
invited to attend a Special Meeting of Shareholders to be held on
, 2000, at 10:00 a.m., at the corporate offices
of Foothill Independent Bank, located at 510 South Grand Avenue in Glendora,
California.
The purpose of the Special Meeting is to consider four proposals, each of
which is identified and described in the enclosed materials. The first proposal,
which is to change the Company's state of incorporation from California to
Delaware, is especially important. The Proxy Statement describes this proposal,
as well as the other three proposals to be presented at the meeting involving
certain amendments to the Company's Articles of Incorporation.
We are pleased that you have chosen to be an owner of Foothill Independent
Bancorp shares and hope that, whether or not you attend the meeting, you will
vote as soon as possible by returning the enclosed proxy card. Your vote is
important, and voting by written proxy will ensure your representation at the
Special Meeting. You may revoke your proxy in accordance with the procedures
described in the Proxy Statement at any time prior to the time it is voted.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THE SPECIAL
MEETING EVEN IF YOU CANNOT ATTEND IN PERSON. PLEASE SIGN, DATE, AND RETURN YOUR
PROXY CARD IN THE ENCLOSED ENVELOPE.
Thank you for your continued support.
Sincerely,
George E. Langley
President and Chief Executive Officer
================================================================================
510 South Grand Ave. [ ] Glendora, California 91741 [ ]
(626) 963-8551 [ ] (909) 599-9351
<PAGE> 3
PRELIMINARY COPY
FOOTHILL INDEPENDENT BANCORP
510 SOUTH GRAND AVENUE
GLENDORA, CALIFORNIA 91741
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD , 2000
NOTICE TO THE SHAREHOLDERS OF FOOTHILL INDEPENDENT BANCORP:
A Special Meeting of the Shareholders of Foothill Independent Bancorp (the
"Company") will be held at the corporate offices of Foothill Independent Bank,
located at 510 South Grand Avenue, Glendora, California, on ,
, 2000, at 10:00 A.M., for the purpose of approving:
1. A change in the state of incorporation of the Company from California to
Delaware (Proposal 1);
2. The elimination of cumulative voting in the election of directors
(Proposal 2);
3. An amendment to the Company's Articles of Incorporation to increase the
number of authorized shares of Common Stock of the Company from
12,500,000 to 25,000,000 (Proposal 3); and
4. An amendment to the Company's Articles of Incorporation to create a new
class of shares of Preferred Stock comprised of 10,000,000 shares that
the Board of Directors could issue without further shareholder action
(Proposal 4).
The Company's Bylaws provide that no other business may be conducted at the
meeting except for voting on these four proposals.
Only shareholders of record at the close of business on March 17, 2000 are
entitled to notice of and to vote at the Special Meeting or any adjournment or
postponement thereof.
By order of the Board of Directors
George E. Langley
President and Chief Executive Officer
March , 2000
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, YOU SHOULD COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY.
Returning the enclosed proxy will not prevent you from voting in person if you
choose to attend the Special Meeting.
<PAGE> 4
PRELIMINARY COPY
PROXY STATEMENT
OF
FOOTHILL INDEPENDENT BANCORP
510 SOUTH GRAND AVENUE
GLENDORA, CALIFORNIA 91741
INTRODUCTION
This Proxy Statement is furnished to you in connection with the
solicitation of proxies by the Board of Directors of Foothill Independent
Bancorp, a California corporation (the "Company"), for use at a Special Meeting
of Shareholders to be held on , , 2000, at
10:00 A.M., at the corporate offices of Foothill Independent Bank, located at
510 South Grand Avenue, Glendora, California, and at any adjournment or
postponement thereof (the "Special Meeting"). The purposes of the Special
Meeting are set forth in this Proxy Statement and in the accompanying Notice of
Special Meeting of Shareholders. This Proxy Statement and the accompanying proxy
card are first being mailed, on or about March , 2000, to shareholders of
record as of March 17, 2000.
QUESTIONS AND ANSWERS
<TABLE>
<C> <S> <C>
1. Q: What may I vote on?
A: (1) The reincorporation of the Company in Delaware;
(2) The elimination of cumulative voting;
(3) An increase in the authorized number of shares of Common
Stock; and
(4) The creation of a new class of Preferred Stock.
2. Q: How does the Board recommend that I vote on these Proposals?
A: The Board recommends a vote FOR each of the four Proposals.
3. Q: Who is entitled to vote?
A: Shareholders of record as of the close of business on March
17, 2000 (the "Record Date") are entitled to vote at the
Special Meeting.
4. Q: How do I vote?
A: Sign and date each proxy card you receive and return it in
the postage prepaid return envelope.
5. Q: Can I revoke my Proxy later?
A: You have the right to revoke your proxy at any time at or
before the Special Meeting by:
(1) notifying the Secretary of the Company in writing;
(2) returning a later-dated proxy card, or
(3) attending the meeting and voting in person.
6. Q: Who will count the vote?
A: ChaseMellon Shareholder Services, LLP, the Company's
Transfer Agent, will count the votes and act as the
inspector of election.
7. Q: What shares are included on the proxy card(s)?
A: The shares on your proxy card(s) represent ALL of your
shares. If you do not return your proxy card(s), your shares
will not be voted.
</TABLE>
<PAGE> 5
<TABLE>
<C> <S> <C>
8. Q: What does it mean if I get more than one proxy card?
A: If your shares are registered differently or are in more than one account, you will receive more than one
proxy card. Please sign and return ALL proxy cards to ensure that all your shares are voted.
9. Q: How many shares can vote?
A: As of the Record Date, March 17, 2000, 5,762,656 shares of Common Stock, the only voting securities of the
Company, were issued and outstanding. Every shareholder is entitled to one vote on each Proposal for each
share of Common Stock held.
10. Q: What is a "quorum"?
A: A "quorum" is a majority of the outstanding shares entitled to vote. They may be present in person or
represented by proxy. For the purposes of determining a quorum, shares held by a broker or nominee will be
treated as present if the broker or nominee returns a proxy card, even if the broker or nominee does not
vote on all of the Proposals because it does not have discretionary power to vote on a particular Proposal
or did not receive voting instructions from the beneficial owner of the shares. These shares are called
"broker non-votes" with respect to the Proposals on which such shares are not voted. Abstentions also will
be counted as present for quorum purposes.
11. Q: What vote is required to approve each Proposal?
A: Approval of each of the four Proposals will require the affirmative vote from the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Special Meeting. As a result, shares not
voted, broker non-votes and abstentions with respect to any Proposal will have the effect of a vote
against that Proposal.
12. Q: What happens if I abstain?
A: Proxies marked "abstain" will be counted as shares present for the purpose of determining the presence of
a quorum. However, for purposes of determining the outcome of the vote on a Proposal, shares represented
by proxies marked "abstain" will be equivalent to a vote against the Proposal.
13. Q: Will any other business be conducted?
A: Under the Company's Bylaws, only business that has been identified and brought before the Special Meeting
pursuant to the Notice of Special Meeting may be conducted. No other business may be considered at the
Special Meeting.
14. Q: How will the Company solicit proxies?
A: Mackenzie Partners Incorporated has been retained by the Company to assist in the solicitation of votes.
Its fees are expected to be $10,000, and it will be reimbursed for its out-of-pocket expenses, estimated
to be approximately $10,000. The Company also reimburses brokerage houses and other custodians, nominees
and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation
materials to shareholders. Proxies also may be solicited in person, by telephone, or by facsimile by
directors, officers, and employees of the Company without additional compensation.
</TABLE>
2
<PAGE> 6
PROPOSAL NO. 1 -- REINCORPORATION IN DELAWARE
(ITEM 1 ON PROXY CARD)
------------------------
INTRODUCTION
For the reasons set forth below, the Board believes that it is in the best
interests of the Company and its shareholders to change the state of
incorporation of the Company from California to Delaware (the "Proposed
Reincorporation"). Throughout this Proxy Statement, the Company as currently
incorporated in California will be referred to as "Foothill-California" and the
Company as reincorporated in Delaware (subject to approval by the shareholders
at the Special Meeting) will be referred to as "Foothill-Delaware."
SHAREHOLDERS ARE URGED TO READ CAREFULLY THIS SECTION OF THIS PROXY
STATEMENT, INCLUDING THE RELATED EXHIBITS ATTACHED TO THIS PROXY STATEMENT,
BEFORE VOTING ON THE PROPOSED REINCORPORATION.
The principal reasons for the Proposed Reincorporation are:
- the greater predictability and flexibility provided by the General
Corporation Law of the State of Delaware (the "Delaware law"),
particularly as construed by the Delaware courts;
- the belief that the Company's shareholders will benefit from the
well-established principles of corporate governance that Delaware law
affords;
- the increased ability of the Company to attract and retain qualified
directors and officers, especially in light of prior initiatives in
California to attempt to severely limit the ability of companies to
indemnify directors and officers; and
- the reduction of the Company's vulnerability to unsolicited or hostile
attempts to take over or to obtain control of the Company.
The proposed Foothill-Delaware Certificate of Incorporation (the "Charter")
and its Bylaws are attached as Exhibits A and B, respectively. As described
below, the Proposed Reincorporation includes the implementation of certain
provisions in the Foothill-Delaware Charter and Bylaws which alter the rights of
shareholders and the powers of management and which, in some cases, reduce
shareholder participation in important corporate decisions.
The Proposed Reincorporation will be effected by merging
Foothill-California into a new Delaware corporation that is a wholly-owned
subsidiary of Foothill-California (the "Reincorporation Merger"). Upon
completion of the Reincorporation Merger, Foothill-California, as a corporate
entity, will cease to exist and Foothill-Delaware, the new Delaware corporation,
will succeed to the assets and assume the liabilities of Foothill-California and
will continue to operate the business of the Company under its current name,
Foothill Independent Bancorp.
As provided by the Agreement and Plan of Merger, in substantially the form
attached hereto as Exhibit C (the "Merger Agreement"), each outstanding share of
Foothill-California Common Stock, no par value per share, will be automatically
converted into one share of Foothill-Delaware Common Stock, $0.001 par value per
share, upon the effective date of the Merger. Each stock certificate
representing issued and outstanding shares of Foothill-California Common Stock
will continue to represent the same number of shares of Foothill-Delaware Common
Stock. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING
FOOTHILL-CALIFORNIA STOCK CERTIFICATES FOR FOOTHILL-
DELAWARE STOCK CERTIFICATES. HOWEVER, SHAREHOLDERS MAY REQUEST THAT THEIR
CERTIFICATES BE EXCHANGED IF THEY SO CHOOSE.
Foothill-California Common Stock is currently listed on the Nasdaq National
Market. After the Merger, Foothill-Delaware Common Stock will be listed on the
Nasdaq National Market under the same symbol ("FOOT") as the shares of
Foothill-California Common Stock are listed. There will be no interruption in
the trading of the Company's Common Stock as a result of the Merger. As of the
date the Board approved the
3
<PAGE> 7
Proposed Reincorporation, the closing price of Foothill-California Common Stock
on the Nasdaq National Market was $11.50 per share.
Under the General Corporation Law of the State of California (the
"California law"), the affirmative vote of the holders of a majority of the
outstanding shares of Foothill-California Common Stock is required for approval
of the Merger Agreement and the other terms of the Proposed Reincorporation. See
"Board Recommendation and Vote Required" on p. 18 below. THE PROPOSED
REINCORPORATION HAS BEEN APPROVED BY ALL OF THE MEMBERS OF THE BOARD, WHO
UNANIMOUSLY RECOMMEND A VOTE IN FAVOR OF THE PROPOSAL. If approved by the
shareholders, it is anticipated that the Reincorporation Merger will become
effective (the "Effective Date") as soon as practicable following the Special
Meeting and receipt of required governmental approvals which are identified in
the Merger Agreement. However, as described in the Merger Agreement, the
Reincorporation Merger (and thus the Proposed Reincorporation) may be abandoned
or the Merger Agreement may be amended by the Board (except that the principal
terms may not be amended without shareholder approval) either before or after
shareholder approval has been obtained and prior to the Effective Date if, in
the opinion of the Board, circumstances arise which make it inadvisable to
proceed with the Proposed Reincorporation under the original terms of the Merger
Agreement.
As provided in the California General Corporation Law, shareholders of
Foothill-California will not have appraisal or dissenters' rights with respect
to the Reincorporation Merger. See "Comparison of the Charters and Bylaws of
Foothill-California and Foothill-Delaware and Significant Differences Between
the Corporation Laws of California and Delaware -- Appraisal Rights" on p. 16
below.
The discussion set forth below is qualified in its entirety by reference to
the Foothill-Delaware Charter (also known as its certificate of incorporation),
the Foothill-Delaware Bylaws, the Merger Agreement, and the form of Officer and
Director Indemnification Agreement, copies of which are attached to this Proxy
Statement as Exhibits A, B, C, and D, respectively.
APPROVAL BY SHAREHOLDERS OF THE PROPOSED REINCORPORATION WILL ALSO
CONSTITUTE APPROVAL OF THE MERGER AGREEMENT, THE FOOTHILL-DELAWARE CHARTER, THE
FOOTHILL-DELAWARE BYLAWS, THE FOOTHILL-DELAWARE OFFICER AND DIRECTOR
INDEMNIFICATION AGREEMENT AND ALL PROVISIONS THEREOF.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
As the Company plans for the future, the Board and the Company's management
believe that it is in the best interests of the Company and its shareholders
that the Company be able to draw upon well-established principles of corporate
governance in making legal and business decisions. The predictability of
Delaware law provides a reliable foundation on which the Company's governance
decisions can be based, and the Company believes that its shareholders will
benefit from the responsiveness of Delaware law to their needs and to those of
the corporation they own.
Predictability and Flexibility of Delaware Law. For many years, Delaware
has followed a policy of encouraging incorporation in that state and, in
furtherance of that policy, has been a leader in adopting, construing and
implementing comprehensive, flexible corporate laws that are responsive to the
legal and business needs of the corporations organized under its laws. Many
corporations have chosen Delaware as their original state of incorporation or
have subsequently changed their corporate domiciles to Delaware for these
reasons. Because of Delaware's popularity as the state of incorporation for many
major corporations, both the legislature and the courts in Delaware have
demonstrated an ability and a willingness to act quickly and effectively to meet
changing business needs. The Delaware courts have developed considerable
expertise in dealing with corporate issues, and a substantial body of case law
has developed construing Delaware law and establishing public policies with
respect to corporate legal affairs.
Well-Established Principles of Corporate Governance. There is substantial
judicial precedent in the Delaware courts as to the legal principles applicable
to measures that may be taken by corporations and as to the conduct of boards of
directors under the business judgment rule and other standards. The Company
4
<PAGE> 8
believes that its shareholders will benefit from the well-established principles
of corporate governance that Delaware law affords.
Increased Ability to Attract and Retain Qualified Directors and
Officers. Both California and Delaware law permit a corporation to reduce or
limit the monetary liability of directors for breaches of fiduciary duty in
certain circumstances and to indemnify directors and officers against certain
monetary liability, fees and expenses incurred in connection with the
performance of their duties relating to the corporation. The increasing
frequency of claims and litigation directed against directors and officers has
greatly expanded the risks facing directors and officers of corporations in
exercising their duties. The amount of time and money required to respond to
such claims and to defend such litigation can be substantial. It is the
Company's desire to reduce these risks to its directors and officers, to limit
to the extent possible the situations in which monetary damages can be recovered
against directors and to indemnify its directors and officers to the extent
possible so that the Company may continue to attract and retain qualified
directors and officers who otherwise might be unwilling to serve because of the
risks involved. The Company believes that, in general, Delaware law provides
greater protection to directors and officers than California law and that
Delaware case law regarding a corporation's ability to limit director liability
and to indemnify directors and officers is better developed and provides more
guidance than California law.
In November 1996, Proposition 211 was presented to a vote of the public at
the California general election. If it had been approved, Proposition 211 would
have increased the incidence of lawsuits against directors and officers of
California corporations and, at the same time, would have severely limited the
ability of California corporations to indemnify their directors and officers
against liability in such lawsuits. Although Proposition 211 was defeated, the
California Constitution provides for an initiative process whereby similar
propositions can be placed on the election ballot in the future. As a result,
the Company believes that the more favorable corporate environment afforded by
Delaware will enable it to compete more effectively with other public companies
in attracting and retaining qualified directors and officers.
Reduced Vulnerability to Unsolicited Takeover Attempts and Contests for
Control. In the discharge of its fiduciary obligations to the Company's
shareholders, over the years the Board has evaluated the Company's vulnerability
to potential attempts either to take over or to effectuate changes in control of
the Company. In the course of such evaluation, the Board has considered several,
and adopted certain, defensive strategies or measures designed to enhance the
Board's ability to negotiate with such unsolicited bidders or others that might
seek to attempt a hostile take-over or to effectuate a change of control of the
Company. The defensive measures adopted or approved by the Board in the past
include a shareholder rights plan, severance arrangements with senior officers
and, with the approval of our shareholders, the division of the Board into two
classes with the members of each class standing for election once every two
years.
In 1999, Basswood Financial Partners, L.P., which together with certain of
its affiliated entities ("Basswood"), had acquired, during the prior two years,
approximately 9.6% of Foothill-California's outstanding shares, initiated a
proxy contest seeking to elect one of their representatives to the Board of
Directors in place of one of the candidates nominated by the Board of Directors.
Basswood is an investment fund which purchases shares in publicly traded bank
holding companies, like Foothill-California, with a stated objective of
obtaining appreciation in the value of those shares primarily through sales of
those companies. In its proxy materials, Basswood made it clear that its purpose
in conducting a proxy contest was to force a sale of the Company. Basswood also
admitted that its nominee, if elected, might put the interests of Basswood ahead
of the interests of the other Foothill-California shareholders. Although
Basswood's candidate was defeated, receiving votes from shareholders holding 23%
of the shares voted as compared to 77% received by the Board's nominees, as a
result of that proxy contest the Board has come to believe that:
- directors should represent all of the shareholders and not a special
constituency seeking to place their own special interest over the
interests of the other shareholders;
- certain provisions of California law encourage minority shareholders
seeking to advance their own special interests to resort to proxy
contests because under California law they can obtain representation on
the board of directors even though they are opposed by a significant
majority of the shareholders;
5
<PAGE> 9
- the presence on the board of directors of one or more directors
representing a special constituency seeking to further their own
interests could disrupt and impair the efficient management of a public
company, like Foothill; and
- proxy contests are costly, both in terms of the dollar amounts that must
be incurred to defend against them and the diversion of management's time
and resources from business operations.
The Board also believes that unsolicited takeover attempts and contests for
control may be unfair or disadvantageous to the Company and its shareholders
because, among other reasons:
- a non-negotiated takeover bid or contest for control, or a proxy contest,
may be timed to take advantage of temporarily depressed stock prices;
- a non-negotiated takeover bid or contest for control or proxy contest may
be designed to foreclose or minimize the possibility of more favorable
competing bids or to foreclose alternative transactions or strategies for
increasing shareholder value, which the Board believes was Basswood's
purpose in conducting its proxy contest;
- a non-negotiated takeover bid or change of control transaction, may
involve the acquisition of only a controlling interest in the Company's
stock, without affording all shareholders the opportunity to receive the
same economic benefits in the transaction; and
- a non-negotiated takeover transaction may deprive shareholders of an
adequate opportunity to evaluate the merits of the proposed transaction.
By contrast, if a potential acquiror seeking to effectuate an acquisition
of control of the Company or one or more shareholders seeking representation of
their interests on the Board must negotiate with the Board, the Board can and
will take account of the underlying and long-term values of the Company's
business, the possibilities for alternative transactions on more favorable
terms, the possible advantages from a tax-free reorganization, the anticipated
favorable developments in the Company's business not yet reflected in the stock
price, the equality of treatment of all shareholders and the benefits to the
shareholders, as a whole, of changes in the composition of and the
qualifications of individuals proposed by minority shareholders for election to
the Board.
The Board believes that, for the protection of the Company's shareholders,
any proposed acquisition of control of the Company or proposed business
combination in which the Company might be involved should be thoroughly studied
by the Board to assure that such transactions would be in the best interests of
the Company and its shareholders and that all of the Company's shareholders
would be treated fairly in such transaction. Similarly, the Board believes that
it should have the opportunity to consider both the qualifications of any new
candidates proposed for election to the Board and the interests that such
candidates will be representing if nominated and elected to the Board. The Board
believes that the deliberative process involved in the Board's selection of
candidates for nomination and election to the Board will result in a more
effective Board of Directors and insure that a proper balance can be maintained
between the continuity and stability of management that incumbent directors
provide and the new perspectives and added strengths that new directors can
offer the Company. Over the years, the Board has added new directors who it
believed would contribute new perspectives and add strength to the Company and
its encourages shareholders to submit information to the Board regarding
candidates they believe would make meaningful contributions to the Board and
management of the Company.
For all of these reasons, the Board has re-evaluated the Company's
vulnerability to potential attempts either to take over or to effectuate changes
in control of the Company, including the ability of special shareholder
constituencies to obtain representation on the Company's Board through expensive
and disruptive proxy contests, and has considered other defensive measures that
could be taken to reduce that vulnerability. Defensive measures studied by the
Board include the authorization of "blank-check" Preferred Stock (the rights and
preferences of which may be determined by the Board); the division of the Board
into three classes of directors, from the existing two classes; supermajority
vote requirements for shareholders to amend the Bylaws or the Charter or to
approve take-over or change of control transactions; the elimination of
cumulative
6
<PAGE> 10
voting; permitting directors to be removed from office only for cause; and the
elimination of the ability of shareholders to call special meetings or act by
written consent.
Because Foothill-California's shares are listed on the Nasdaq National
Market and it has more than 800 shareholders of record, it is entitled under
California law, with the approval of the holders of a majority of the
outstanding shares, to eliminate cumulative voting in the election of directors.
In addition, under California law, any California corporation may, with the
approval of a majority of its shareholders, adopt a Charter provision
eliminating the right of shareholders to act by written consent. However,
certain other of these defensive measures are not permitted to be implemented
under California law. By contrast, Delaware, and a number of other states,
permit a corporation to include in its Charter or Bylaws several of these
measures that are designed to reduce a corporation's vulnerability to
unsolicited takeover attempts and contests for control or Board representation.
Reincorporation in Delaware, however, offers an added benefit in that there is
also substantial judicial precedent in the Delaware courts as to the legal
principles applicable to such defensive measures and as to the conduct of a
board of directors under the business judgment rule with respect to unsolicited
takeover attempts and other contests for control. As a result, one of the
purposes of the Proposed Reincorporation is to enable the Company to implement
some of these defensive measures, which are described below in the section
entitled "Comparison of Charters and Bylaws of Foothill-California and
Foothill-Delaware and Significant Differences between the Corporation Laws of
California and Delaware" beginning at page 8 below.
In sum, the Board believes that the Proposed Reincorporation is prudent and
in the best interests of the Company and its shareholders and should be adopted
for their protection.
POSSIBLE DISADVANTAGES OF THE PROPOSED REINCORPORATION
Despite the beliefs of the Board as to the benefits of the Proposed
Reincorporation to the Company and its shareholders, the Proposed
Reincorporation may have the effect of discouraging a future takeover attempt or
contest for control that is not approved by the Board but is favored by
individual shareholders. This outcome could result even if a majority of the
shareholders believe that such a takeover attempt or change of control to be in
their best interests or if the shareholders might receive a substantial premium
for their shares over the then current market value or over their cost basis in
their shares. As a result of the adoption of the Proposed Reincorporation,
shareholders who wish to participate in an unsolicited tender offer may not have
an opportunity to do so if such tender offer is not approved by the Board.
Furthermore, adoption of the Proposed Reincorporation will not necessarily
ensure or guarantee that shareholders will receive a price for their shares in
connection with an acquisition of control of the Company that reflects the value
of such shares or that is fair and equitable, although, in the opinion of the
Board, the likelihood that the price will reflect such value and will be fair
and equitable will be increased by the Proposed Reincorporation. In addition,
the Proposed Reincorporation could make it more difficult to change the existing
Board and management of the Company.
NO CHANGE IN THE CORPORATE NAME, BOARD MEMBERS, BUSINESS, MANAGEMENT, EMPLOYEE
BENEFIT PLANS OR LOCATION OF PRINCIPAL FACILITIES OF THE COMPANY
The Proposed Reincorporation will result only in a change in the legal
domicile of the Company and certain other changes of a legal nature, the most
significant of which are described in this Proxy Statement. The Proposed
Reincorporation will NOT result in any change in the name, business, management,
fiscal year, assets, liabilities or location of the offices of the Company. The
directors who serve on the Board of Foothill-California will become the initial
directors of Foothill-Delaware. All stock options, and all employee benefit,
stock option and stock purchase plans and the dividend reinvestment plan of
Foothill-California will be assumed and continued by Foothill-Delaware, and each
option or right issued by such plans will automatically be converted into an
option or right to purchase the same number of shares of Foothill-Delaware
Common Stock, at the same price per share, upon the same terms and subject to
the same conditions. Shareholders should note that approval of the Proposed
Reincorporation will also constitute approval of the assumption of these plans
by Foothill-Delaware. Other employee benefit programs of Foothill-California
also will be continued by Foothill-Delaware upon the terms and subject to the
conditions currently in effect.
7
<PAGE> 11
As noted above, after the Merger, the shares of the Company's Common Stock
will continue to be listed, without interruption, on the Nasdaq National Market
and under the same symbol ("FOOT"). The Company believes that the Proposed
Reincorporation will not affect any of its material contracts with any third
parties and that Foothill-California's rights and obligations under such
material contractual arrangements will continue and be assumed by
Foothill-Delaware.
COMPARISON OF CHARTERS AND BYLAWS OF FOOTHILL-CALIFORNIA AND FOOTHILL-DELAWARE
AND SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND
DELAWARE
General. The provisions of the Foothill-Delaware Charter are more
comprehensive than those of the Foothill-California Charter (also known as its
articles of incorporation) and material changes are discussed below. The
Foothill-Delaware Bylaws are similar to the Foothill-California Bylaws in many
respects, but differ in certain other respects. As a result, the Proposed
Reincorporation will have the effect of altering the rights of shareholders and
the powers of management, and in some cases may reduce shareholder participation
in important corporate decisions and may have "anti-takeover" implications. See
"Principal Reasons for the Proposed Reincorporation -- Reduced Vulnerability to
Unsolicited Takeover Attempts and Contests for Control" on p. 5 and "Possible
Disadvantages of Reincorporation" on p. 7 above.
Pursuant to Delaware law, certain other changes altering the rights of
shareholders and powers of management could be implemented in the future by
amendment of the Foothill-Delaware Charter following shareholder approval or by
amendment of the Foothill-Delaware Bylaws by the Board without shareholder
approval. Except for the provisions described below, the Board does not have any
current plans to implement any additional provisions to the Foothill-Delaware
Charter or Bylaws that may have "anti-takeover" implications.
Approval by the shareholders of the Proposed Reincorporation will
constitute approval of the inclusion in the Foothill-Delaware Charter and Bylaws
of each provision contained in such documents. In addition, approval of the
Proposed Reincorporation will result in certain substantive differences in the
corporate law governing the Company. While the Foothill-Delaware and
Foothill-California Charters and Bylaws and the respective laws of California
and Delaware are discussed below, such discussion contains neither an exhaustive
description of all differences between the Foothill-Delaware and
Foothill-California Charters and Bylaws nor an exhaustive description of the
differences between the laws of the two states. The discussion below of the
Foothill-Delaware Charter and Bylaws is qualified by reference to Exhibits A and
B hereto, respectively.
Authorized Capitalization. If the Proposed Reincorporation is approved, the
authorized capitalization of Foothill-Delaware will be increased from the
authorized capitalization of Foothill-California. The Foothill-Delaware Charter
authorizes the Company to issue 25,000,000 shares of Common Stock and 10,000,000
shares of Preferred Stock, an increase in authorized capital stock from the
Foothill-California Charter, which authorizes the Company to issue only
12,500,000 shares of Common stock and no shares of Preferred Stock. Each share
of Foothill-Delaware stock has a par value of $0.001 per share, while each share
of Foothill-California stock has no par value. The difference in par value is
without significance.
The additional shares of Common Stock and Preferred Stock could be used for
a variety of purposes, including financing transactions, acquisitions and other
corporate purposes. The Board will have the authority to issue the additional
shares authorized under the Foothill-Delaware Charter without further action by
the shareholders. The issuance of additional shares of capital stock may, among
other things, dilute the equity or book value per share, earnings per share and
voting rights of current holders of capital stock. An increase in the number of
authorized shares could make it more difficult for a third party to acquire, or
could discourage a third party from seeking to acquire, a majority of the
outstanding voting stock of the Company.
"Blank-Check" Preferred Stock. The Foothill-Delaware Charter authorizes the
Board to issue "blank-check" Preferred Stock, which is not authorized under the
Foothill-California Charter. Pursuant to the Foothill-Delaware Charter, the
Board is authorized to issue, without any action on the part of the Company's
shareholders, up to 10,000,000 shares of such "blank-check" Preferred Stock. The
Foothill-Delaware Charter grants the Board the authority to divide the preferred
shares into one or more series and to fix and determine the relative powers,
rights and preferences, including the voting rights, and the qualifications,
limitations or
8
<PAGE> 12
restrictions, of the shares of each series. The issuance of preferred shares
could be used by the Board as a method of discouraging, delaying or preventing a
change in control of the Company or to resist takeover offers opposed by the
Company's management. Under certain circumstances, the Board could create
impediments for or frustrate persons seeking to effect a hostile takeover or
otherwise gain control of the Company by causing preferred shares with voting or
conversion rights to be issued to a holder or holders who side with the Board.
Classified Board of Directors. A classified or "staggered" board of
directors is one on which a certain number, but not all, of the directors are
elected on a rotating basis each year. California law generally requires that
directors be elected annually but permits a classified board if (a) the
corporation is listed on a national stock exchange or (b) the corporation's
shares are quoted on the Nasdaq National Market and are held by at least 800
shareholders. Under California law, such a "listed" corporation may, with the
approval of its shareholders, divide its board into two or three classes by
adopting amendments to its articles of incorporation. California law requires
that a corporation that adopts a classified board must have at least six
directors authorized if it divides its board into two classes, and must have at
least nine directors authorized if it divides its board into three classes.
Foothill-California is such a listed company because its shares are listed on
the Nasdaq National Market and it has more than 800 shareholders. With the
approval of its shareholders, Foothill-California amended its Charter in 1994 to
divide the Board into two classes, with the members of each class elected for a
two year term. Delaware law permits a corporation to have a classified board of
up to three classes, but unlike California law, does not prescribe a minimum
number of directors. This method of electing directors makes a change in the
composition of a board of directors and, consequently, a potential change in
control of a corporation a lengthier and more difficult process.
The Foothill-Delaware Bylaws provide for a classified board of directors
consisting of three classes, with each class elected for a term of three years
expiring in successive years. Two of the classes will be comprised of two
directors each and the third class will be comprised of three directors. By
comparison, Foothill-California's Board of Directors is divided into two classes
directors: Class I consisting of four directors whose term of office expires in
2000 and Class II consisting of three directors whose term of office expires in
2001. If the Proposed Reincorporation is approved and implemented, at the first
annual meeting of shareholders of Foothill-Delaware, which is currently expected
to take place by June , 2000, Class I would be divided into two classes,
designated Class I and Class II, respectively, each comprised of two directors.
The Class I directors and the Class II directors would be elected separately at
the 2000 Annual Meeting, with the Class I directors being elected for a two year
term ending in 2002 and the Class II directors for a three year term ending in
2003. The remaining three directors of Foothill-California whose term of office
expires in 2001, would be re-designated as Class III directors of
Foothill-Delaware, would complete the remainder of their current two year term
for which they were elected last year and would stand for election for a term of
three years ending in 2004 at the Annual Meeting to be held in 2001. Thereafter,
each Class of directors would be elected for successive three year terms.
The Board believes that the staggered three-year terms of a classified
board, with the election of approximately one-third of the directors each year,
will help to assure the continuity and stability of the Company's long-term
policies in the future and permit it to more effectively represent the interests
of all shareholders, since at least two-thirds of the directors at any given
time will have prior experience as directors of the Company.
The division of the two existing classes of directors into three classes
will, however, have the effect of making it more difficult to change the overall
composition of the Board of Directors. At least three annual meetings of the
shareholders, instead of two annual meetings, will be required for the
shareholders to change the entire Board. In addition, if approved, Proposal No.
2 to eliminate cumulative voting and the provision under Delaware law that the
directors may only be removed for cause, will also make it more difficult to
change the composition of the Board. See "Elimination of Cumulative Voting" and
"Removal of Directors" at page 10 below, and "Proposal No. 2 -- Elimination of
Cumulative Voting" below at page 18 below.
9
<PAGE> 13
Elimination of Cumulative Voting for Directors. Cumulative voting rights in
the election of directors entitle a shareholder to give one nominee as many
votes as are equal to the number of directors to be elected multiplied by the
number of shares owned by the shareholder, or to distribute such votes among two
or more nominees, as the shareholder sees fit. In the absence of cumulative
voting, the holder or holders of the majority of the shares present or
represented at a meeting have the power to elect each director to be elected at
such meeting. The absence of cumulative voting would make it more difficult for
minority shareholders adverse to a majority of the shareholders to obtain
representation on a corporation's board of directors. California law requires
cumulative voting in the election of directors, but permits a "listed"
corporation, such as Foothill-California, to eliminate cumulative voting.
Foothill-California has not done so. Under Delaware law, shares may not be
cumulatively voted for the election of directors of the Company unless the
Charter specifically provides for cumulative voting.
The Board has come to believe that, especially in publicly-held companies,
each director should represent the interests of all of the shareholders rather
than the interests of a special constituency, and that the presence on the Board
of one or more directors representing such a constituency could disrupt and
impair the efficient management of Foothill-Delaware. The Board also believes,
as a result of its experience with the Basswood proxy contest last year, that
cumulative voting in the election of directors can serve to encourage minority
shareholders to resort to expensive and disruptive proxy contests to advance
their own special interests, even if they are opposed by a majority of the
shareholders. As a result, the Board has approved and is recommending that
shareholders adopt a proposal, at the Special Meeting, designated as Proposal
No. 2, to eliminate cumulative voting in the election of directors and thereby
insure that directors are elected by majority vote of the shareholders. If that
Proposal is adopted by the shareholders, beginning with the next annual
shareholders meeting, directors will be elected by majority vote rather than
cumulative vote, whether or not the Proposed Reincorporation is approved and
implemented. If, on the other hand, Proposal No. 2 is not adopted, shareholders
will be entitled to elect directors by cumulative voting whether or not the
Proposed Reincorporation is approved and implemented. See "Proposal No.
2 -- Elimination of Cumulative Voting" at page 18 below.
Filling Vacancies on the Board. Under California law, any vacancy on the
Board (other than one created by removal of a director) may be filled by a
majority of the remaining directors of the Company constituting no less than a
quorum. If the number of directors is less than a quorum, a vacancy may be
filled by the unanimous written consent of the directors then in office or by
the affirmative vote of a majority of the directors at a meeting held based on
notice or waiver of notice. A vacancy created by removal of a director may be
filled by the Board only if so authorized by the Foothill-California Charter or
Bylaws, neither of which authorize such action by the Board.
Delaware law differs in that vacancies and newly-created positions on the
Board may be filled by a majority of the directors of the Company then in office
(even though less than a quorum) or by a sole remaining director, unless
otherwise provided in the Foothill-Delaware Charter or Bylaws (or unless the
Foothill-Delaware Charter directs that a particular class of stock is to elect
such directors, in which case a majority of the directors elected by such class
would fill such vacancy or newly-created position). Unlike the
Foothill-California Bylaws, the Foothill-Delaware Bylaws provide that the
remaining directors can fill any vacancy on the Board, including a vacancy
created by the removal of a director.
Amendment of Bylaws. Under California law, a corporation's bylaws may be
adopted, amended or repealed either by the vote of a majority of the outstanding
shares or by the approval of the board of directors of such corporation. Neither
the Foothill-California Charter nor the Foothill-California Bylaws contain
provisions restricting or eliminating the rights to adopt, amend or repeal
granted under California law. Delaware law provides that a corporation's bylaws
may be amended by that corporation's shareholders or, if so provided in the
corporation's charter, by the corporation's board of directors. The
Foothill-Delaware Charter gives the Board the power to alter, amend or repeal
the Foothill-Delaware Bylaws. In addition, the Foothill-Delaware Charter
authorizes Foothill-Delaware's shareholders the right to adopt, amend or repeal
the Foothill-Delaware Bylaws, but only with the affirmative vote of the holders
of not less than sixty-six and two-thirds percent (66 2/3%) of the outstanding
voting shares of Foothill-Delaware Common Stock entitled to vote on such
matters. As a result, the percentage of shareholder approval required to adopt,
10
<PAGE> 14
amend, or repeal a bylaw of Foothill-Delaware will be higher than the
corresponding percentage with respect to the Foothill-California Bylaws; and
such higher percentage shall apply to proposed amendments or changes to
provisions contained in the Bylaws relating to such matters as the authorized
number of directors of Foothill-Delaware, the manner in which they are elected,
their terms of office and their removal, and the persons entitled to call
special shareholders meetings.
Special Shareholders' Meetings. Pursuant to California law, the
Foothill-California Bylaws provide that a special meeting of shareholders may be
called by the Board, the Chairman of the Board or the President of the Company
or by the holders of shares of the Company entitled to cast not less than 10% of
the votes at such meeting. Under Delaware law, a special meeting of shareholders
may be called by the board of directors of a corporation or by any other person
authorized to do so in the corporation's charter or bylaws. The Foothill-
Delaware Charter provides that only the persons specified in the Bylaws shall be
entitled to call special meetings of shareholders and the Bylaws limit those
persons to the Board, the Chairman of the Board, or the President of
Foothill-Delaware. Therefore, holders of 10% or more of the voting shares of
Foothill-Delaware will not be able to call a special meeting of shareholders.
The Foothill-Delaware Charter also provides that the provision of the Charter
relating to the calling of special meetings by shareholders may be changed only
by the affirmative vote of the holders of not less than 66 2/3% of the
outstanding voting shares of the Corporation.
The Board believes this change is warranted as a prudent corporate
governance measure to prevent an inappropriately small number of shareholders
from prematurely forcing shareholder consideration of a proposal over the
opposition of the Board by calling a special shareholders' meeting before (i)
the time that the Board believes such consideration to be appropriate or (ii)
the next annual meeting. Such special meetings would involve substantial expense
and diversion of Board and management time, results which the Board believes to
be inappropriate for an enterprise the size of the Company.
The elimination of the procedures for shareholders to call special meetings
could discourage hostile takeover attempts or tender offers for control of
Foothill-Delaware which might be approved by many, or indeed by a majority, of
Foothill-Delaware's shareholders. In addition, elimination of the ability of
shareholders to call a special meeting means that a shareholder proposal to
replace the Board would be restricted to only annual meetings, thereby making
the removal of directors by shareholders more difficult. See "Possible
Disadvantages of Reincorporation" on p. 7 above.
Nomination of Directors and Introduction of Business at Shareholder
Meetings. The Foothill-Delaware Bylaws include advance notice procedures similar
to those included in the Foothill-California Bylaws with regard to the
nomination of directors, other than by or at the direction of the Board (the
"Nomination Procedure "), and with regard to other matters to be brought before
an annual meeting of shareholders by a shareholder of the Company (the "Proposal
Notice Requirement"). Both the Foothill-California Bylaws and the
Foothill-Delaware Bylaws establish the deadline for giving such notice to the
Company at not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting.
By requiring advance notice of nominations by shareholders, the Nomination
Procedure affords the Board an opportunity to consider the qualifications of the
proposed nominees and, to the extent deemed necessary or desirable by the Board,
to inform the shareholders about such qualifications. By requiring advance
notice of proposed business, the Proposal Notice Requirement provides the Board
with an opportunity to inform shareholders of the nature of any business
proposed to be conducted at a meeting and the Board's position on any such
proposal, enabling shareholders to better determine how to vote their shares in
regard to such business.
The Nomination Procedure and the Proposal Notice Requirement may have the
effect of precluding a nomination for the election of directors or of precluding
any other business at a particular meeting if the proper procedures are not
followed. In addition, the procedures may discourage or deter a third party from
conducting a solicitation of proxies to elect its own slate of directors or
otherwise attempting to obtain control of the Company, even if such nominations
for the election of directors or other business might be deemed by the majority
of shareholders to be beneficial to the Company and its shareholders.
11
<PAGE> 15
Under both the Foothill-California Bylaws and Foothill-Delaware Bylaws,
only such business may be conducted at a special meetings of the shareholders as
shall have been identified and brought before the meeting pursuant to the notice
of such meeting. However, as shareholders with more than 10% of the voting stock
of the Company will no longer be able to call special meetings, only the Board
will be able to nominate persons for election as directors of the Company at
special meetings under the Foothill-Delaware Bylaws.
Shareholder Approval of Certain Business Combinations. Under Section 203 of
the Delaware General Corporation Law, a Delaware corporation is prohibited from
engaging in a "business combination" with an "interested shareholder" for three
years following the time that such person or entity becomes an interested
shareholder. With certain exceptions, an interested shareholder is a person or
entity who or which owns, individually or with or through certain other persons
or entities, fifteen percent (15%) or more of the corporation's outstanding
voting stock (including any rights to acquire stock by an option, warrant,
agreement, arrangement or understanding, or upon the exercise of conversion or
exchange rights, and stock with respect to which the person has voting rights
only). The three-year moratorium imposed by Section 203 on business combinations
does not apply if (i) prior to the time such shareholder becomes an interested
shareholder, the board of directors of the subject corporation approves either
the business combination or the transaction that resulted in the person or
entity becoming an interested shareholder; (ii) upon consummation of the
transaction that made him or her an interested shareholder, the interested
shareholder owns at least eighty-five percent (85%) of the corporation's voting
stock outstanding at the time the transaction commenced (excluding from the 85%
calculation shares owned by directors who are also officers of the subject
corporation and shares held by employee stock plans that do not give employee
participants the right to decide confidentially whether to accept a tender or
exchange offer) or (iii) at or after the time such person or entity becomes an
interested shareholder, the board of directors approves the business combination
and it is also approved at a shareholder meeting by sixty-six and two-thirds
percent (66 2/3%) of the outstanding voting stock not owned by the interested
shareholder. Although a Delaware corporation to which Section 203 applies may
elect not to be governed by Section 203, the Board intends that the Company be
governed by Section 203. The Board believes that most Delaware corporations have
availed themselves of this statute and have not opted out of Section 203.
The Board believes that Section 203 will encourage any potential acquiror
to negotiate with the Board. Section 203 also might have the effect of limiting
the ability of a potential acquiror to make a two-tiered bid for
Foothill-Delaware in which all shareholders would not be treated equally.
Shareholders should note, however, that the application of Section 203 to
Foothill-Delaware will confer upon the Board the power to reject a proposed
business combination in certain circumstances, even though a potential acquiror
may be offering a substantial premium for Foothill-Delaware's shares over the
then-current market price. Section 203 would also discourage certain potential
acquirors who are unwilling to negotiate with the Board.
California law requires that holders of Common Stock receive Common Stock
in a merger of the corporation with the holder of more than fifty percent (50%)
but less than ninety percent (90%) of the target's Common Stock or its affiliate
unless all of the target company's shareholders consent to the transaction. This
provision of California law may have the effect of making a "cash-out" merger by
a majority shareholder more difficult to accomplish. Although Delaware law does
not parallel California law in this respect, under some circumstances Section
203 does provide similar protection to shareholders against coercive two-tiered
bids for a corporation in which the shareholders are not treated equally.
Action by Written Consent of Shareholders. Unless otherwise provided in a
corporation's charter, both California and Delaware law permit any action which
may be taken at any annual or special meeting of shareholders to be taken
without a meeting and without prior notice if a written consent, setting forth
the action to be taken, is signed by the holders of outstanding shares of the
corporation's capital stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. The
Foothill-California Charter does not contain a provision limiting the Company's
shareholders' right to take action by written consent. In contrast, the
Foothill-Delaware Charter does not permit the Company's shareholders to take
action by written consent unless the action to be taken, and the taking of that
action by written consent, has been approved in advance by the Board of
Directors. Thus, shareholders will no longer have the ability to take action by
written consent without the Board's prior approval. The Foothill-Delaware
Charter also provides that the vote of the holders of
12
<PAGE> 16
not less than 66 2/3% of Foothill-Delaware's voting stock shall be required to
change this provision of its Charter.
The restriction on shareholder action by written consent, coupled with the
elimination of the ability of shareholders to call special shareholder meetings,
means that shareholder proposals relating to amendments to the
Foothill-Delaware's Charter or Bylaws, as well as to other matters requiring a
vote of the shareholders, would be restricted to annual meetings. See "Possible
Disadvantages of Reincorporation" on p. 7 above.
Removal of Directors. Under California law, any director or the entire
board of directors may be removed, with or without cause, by approval of a
majority of the outstanding shares entitled to vote; however, no individual
director may be removed (unless the entire board is removed) if the number of
votes cast against such removal would be sufficient to elect the director under
cumulative voting. Delaware law provides that a director of a corporation can be
removed with or without cause by the holders of a majority of the shares then
entitled to vote in an election of directors unless the corporation has adopted
a classified board of directors or adopted cumulative voting for directors;
Foothill-Delaware has adopted a classified board of directors, and
Foothill-Delaware's Charter provides that directors are removable only with
cause by approval of a majority of the outstanding shares entitled to vote.
Limitation of Liability of Directors. California and Delaware have similar
laws respecting the elimination of the liability of a director to the
corporation or its shareholders for monetary damages for breach of the
director's fiduciary duty, provided that such liability does not arise from
certain proscribed conduct. California law does not permit the elimination or
limitation of monetary liability where such liability is based on: (i)
intentional misconduct or knowing and culpable violation of law; (ii) acts or
omissions that a director believes to be contrary to the best interests of the
corporation or its shareholders or that involve the absence of good faith on the
part of the director; (iii) receipt of an improper personal benefit; (iv) acts
or omissions that show reckless disregard for the director's duty to the
corporation or its shareholders, where the director in the ordinary course of
performing a director's duties should be aware of a risk of serious injury to
the corporation or its shareholders; (v) acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the corporation and its shareholders; (vi) transactions between the
corporation and a director who has a material financial interest in such
transaction or (vii) liability for improper distributions, loans or guarantees.
Delaware law does not permit the elimination or limitation of director
monetary liability for: (i) breaches of the director's duty of loyalty to the
corporation or its shareholders; (ii) acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law; (iii) the payment
of unlawful dividends or unlawful stock repurchases or redemptions or (iv)
transactions in which the director received an improper personal benefit. Such
provision also may not limit a director's liability for violation of, or
otherwise relieve the Company or its directors from the necessity of, complying
with federal or state securities laws, or affect the availability of
non-monetary remedies such as injunctive relief or rescission.
The Foothill-Delaware Charter provides for the elimination of personal
monetary liability of directors to the fullest extent permissible under Delaware
law. The Foothill-California Charter contains a comparable provision. Because
Delaware law is more permissive under certain circumstances than California law
with respect to eliminating monetary liability of directors, the
Foothill-Delaware Charter is potentially broader in application than
Foothill-California's comparable charter provision. The Foothill-Delaware
Charter provision also incorporates any future amendments to Delaware law that
further eliminate or limit such liability.
The Board believes that the elimination of liability in the
Foothill-Delaware Charter is in the best interests of the Company in that it
maintains its ability to attract and retain qualified individuals to serve as
directors, by providing assurance that decisions made in good faith will not
subject them to personal liability by a court evaluating their decisions with
the benefit of hindsight. However, this provision will limit the remedies
available to shareholders dissatisfied with a Board decision, even if such
decision involved gross negligence on the part of the directors. In such case,
the shareholders' only remedy would be to file suit to stop the completion of
the Board's action, which remedy may not be effective if such action has already
been completed.
13
<PAGE> 17
Indemnification. California and Delaware have similar laws respecting
indemnification by a corporation of its officers, directors, employees and other
agents. California law requires indemnification when the individual has defended
successfully the action on the merits while Delaware law requires
indemnification when there has been a successful defense on the merits or
otherwise. If the individual loses or settles, the laws of both states, with
some differences, provide for permissive indemnification (i.e., it is not
required, but the corporation may indemnify). Delaware law generally permits
indemnification of expenses, including attorneys' fees, actually and reasonably
incurred in the defense or settlement of a derivative or third-party action,
provided there is a determination (i) by a majority vote of the directors who
are not parties to such action, suit or proceeding, even though less than a
quorum, (ii) by a committee of such directors designated by majority vote of
such directors, even though less than a quorum, (iii) by independent legal
counsel or (iv) by a majority vote of a quorum of the shareholders that the
person seeking indemnification acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation.
Without court approval, however, no indemnification may be made in respect of
any derivative action in which such person is adjudged liable for negligence or
misconduct in the performance of his or her duty to the corporation. California
law allows indemnification if, with respect to the matter giving rise to the
lawsuit, the individual acted (i) in good faith and (ii) for the purpose or in a
manner that he reasonably believed to be in the best interests of the
corporation. Although California law is similar to Delaware law in that it
requires determination to be made by the majority vote of non-party directors or
by the majority vote of a quorum of the shareholders, California law also
provides for determination to be made by the court. However, it does not allow
for determination to be made by an independent counsel.
Expenses incurred by an officer or director in defending an action may be
paid in advance, under Delaware law and California law, if such director or
officer undertakes to repay such amounts if it is ultimately determined that he
or she is not entitled to indemnification. In addition, the laws of both states
authorize a corporation's purchase of indemnity insurance for the benefit of its
officers, directors, employees and agents whether or not the corporation would
have the power to indemnify against the liability covered by the policy.
California law permits the Company to provide such additional rights to
indemnification beyond those mandated by statute to the extent such additional
indemnification is authorized in its charter. The Foothill-California Charter
contains such a specific authorizing provision with respect to indemnification.
Delaware law permits the Company to provide indemnification in excess of
that mandated by statute, but Delaware law does not require authorizing
provisions in the Foothill-Delaware Charter and does not contain express
prohibitions on indemnification in certain circumstances. Limitations on
indemnification may be imposed by a court, however, based on principles of
public policy. Foothill-Delaware's Bylaws allow for indemnification to the
maximum extent permitted by Delaware law and Foothill-Delaware intends to enter
into an Officer and Director Indemnification Agreement with each of its officers
and directors, a copy of which is attached to this Proxy Statement as Exhibit D.
As of the date of this Proxy Statement, the Company is not aware of any
actions pending or threatened against officers or directors of
Foothill-California or Foothill-Delaware in their capacities as such.
Inspection of Shareholder List. Both California and Delaware law allow any
shareholder to inspect the shareholder list for a purpose reasonably related to
such person's interest as a shareholder. However, under California law this
right of inspection is limited to record shareholders; whereas the Delaware
courts have extended that right under Delaware law to beneficial holders of
shares. Like California law, Delaware law provides for inspection rights as to a
list of shareholders entitled to vote at a meeting for any purpose germane to
the meeting, but limits such inspection to the 10-day period preceding a
shareholders' meeting. California law, unlike Delaware law, also provides that
persons with record ownership of an aggregate of five percent (5%) or more of
the corporation's voting shares and that persons with record ownership of an
aggregate of one percent (1%) or more of such shares who have contested the
election of directors have the right to inspect and copy the corporation's
shareholder list without establishing the purpose for such inspection.
Shareholder Approval of Mergers. Both California and Delaware law generally
require that the holders of majority of the shares of both acquiring and target
corporations approve statutory mergers with differing exceptions to this general
requirement.
14
<PAGE> 18
Delaware law does not require a shareholder vote of the surviving
corporation in a merger (unless the corporation provides otherwise in its
charter) if: (i) the merger agreement does not amend the existing charter; (ii)
each share of stock of the surviving corporation outstanding immediately before
the effective date of the merger is an identical outstanding share after the
merger and (iii) either (a) no shares of Common Stock of the surviving
corporation and no shares, securities or obligations convertible into such stock
are to be issued or delivered under the plan of merger or (b) the authorized
unissued shares or shares of Common Stock of the surviving corporation to be
issued or delivered under the plan of merger plus those initially issuable upon
conversion of any other shares, securities or obligations to be issued or
delivered under such plan do not exceed twenty percent (20%) of the shares of
Common Stock of such constituent corporation outstanding immediately prior to
the effective date of the merger.
California law contains a similar exception to its voting requirements for
reorganizations where shareholders or the corporation itself, or both,
immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than 83 1/3% (or five-sixths)
of the voting power of the surviving or acquiring corporation or its parent
entity.
Sources of Dividends and Repurchases of Shares. California law dispenses
with the concepts of par value of shares as well as statutory definitions of
capital, surplus and the like. The concepts of par value, capital and surplus
exist under Delaware law.
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets. In addition, Delaware law generally provides that a
corporation may redeem or repurchase its shares only if the capital of the
corporation is not impaired (meaning that the value of the assets of the
corporation is less than the amount represented by the aggregate outstanding
shares of the capital stock of the corporation) and such redemption or
repurchase would not impair the capital of the corporation. The ability of a
Delaware corporation to pay dividends on, or to make repurchases or redemptions
of, its shares is dependent on the financial status of the corporation standing
alone and not on a consolidated basis. In determining the amount of surplus of a
Delaware corporation, the assets of the corporation, including stock of
subsidiaries owned by the corporation, may be valued at their fair market value
as determined by the board of directors, regardless of their historical book
value.
Under California law, a corporation may not make any distribution to its
shareholders unless either: (i) the corporation's retained earnings immediately
prior to the proposed distribution equal or exceed the amount of the proposed
distribution or (ii) immediately after giving effect to such distribution, the
corporation's assets (exclusive of goodwill, capitalized research and
development expenses and deferred charges) would be at least equal to 1 1/4
times its liabilities (not including deferred taxes, deferred income and other
deferred credits), and the corporation's current assets would be at least equal
to its current liabilities (or 1 1/4 times its current liabilities if the
average pre-tax and pre-interest expense earnings for the preceding two fiscal
years were less than the average interest expense for such years). Such tests
are applied to California corporations on a consolidated basis.
The Proposed Reincorporation will have no effect on the ability of the
Company to pay cash dividends or the Company's dividend policy.
Additionally, in the case of the Company, the principal source of funds for
the payment of cash dividends are cash dividends from its principal wholly owned
subsidiary, Foothill Independent Bank, a California banking corporation (the
"Bank"). The laws pertaining to the payment of dividends by a California banking
corporation differ from those applicable to other types of California
corporations. Under those laws, the approval of the California Commissioner of
Financial Institutions is required before a state-chartered bank, such as the
Bank, may declare a dividend which would exceed the lesser of: (i) the Bank's
retained earnings or (ii) its net income for the immediately preceding three
years (after deducting all dividends paid during that period). Additionally, due
to capital requirements imposed by federal and state government banking agencies
banks must maintain a substantial portion of their earnings to support their
operations and, therefore, most
15
<PAGE> 19
banks do not pay cash dividends in amounts even approximating the maximum
permissible dividends under applicable laws.
Loans to Directors, Officers and Other Employees. Under California law, a
corporation may make loans to, or guarantees for the benefit of, directors and
officers if such loans or guarantees are approved by a majority of the
corporation's shareholders or, for corporations with 100 or more shareholders of
record, by its board of directors acting under a shareholder-approved bylaw. The
Foothill-California Bylaws do not authorize the Company to make loans or
guarantees to any director or officer of the Company. Under Delaware law, the
Company may make loans to, guarantee the obligations of or otherwise assist its
officers or other employees (including directors who are officers of employees)
and those of its subsidiaries when such action, in the judgment of the Board,
may reasonably be expected to benefit the corporation, and the Foothill-Delaware
Bylaws have a provision to that effect.
However, Foothill Independent Bank, the Company's wholly owned banking
subsidiary (the "Bank"), is a state chartered banking corporation and is in the
business of making loans, Federal and California state laws permit the Bank to
make loans to directors, whether or not they are employed by the Company or the
Bank, and also to officers and other employees of the Company, subject to
specific bank regulatory restrictions relating to the terms and amounts of such
loans, the creditworthiness of the borrowers, the manner in which the loans must
be approved by the Bank and other matters. The Proposed Reincorporation will not
affect the Bank's practices or policies with respect to the making of loans to
directors, officers or other employees of the Company.
Appraisal Rights. Under both California and Delaware law, a shareholder of
a corporation participating in certain major corporate transactions may, under
varying circumstances, be entitled to appraisal rights under which such
shareholder may receive cash in the amount of the fair market value of his or
her shares in lieu of the consideration he or she would otherwise receive in the
transaction.
Under Delaware law, such appraisal rights are not available: (i) with
respect to the sale, lease or exchange of all or substantially all of the assets
of a corporation; (ii) with respect to a merger or consolidation by a
corporation the shares of which are listed on a national securities exchange,
designated as a national market system on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 holders if such shareholders receive only shares of the surviving
corporation or shares of any other corporation that are either listed on a
national securities exchange or held of record by more than 2,000 holders, plus
cash in lieu of fractional shares of such corporations; or (iii) to shareholders
of a corporation surviving a merger if no vote of the shareholders of the
surviving corporation is required to approve the merger under Delaware law.
The limitations on the availability of appraisal rights under California
law are different from those under Delaware law. Shareholders of a California
corporation whose shares are listed on a national securities exchange generally
do not have such appraisal rights unless the holders of at least five percent
(5%) of the class of outstanding shares claim the right or the corporation or
any law restricts the transfer of such shares. Appraisal rights are also
unavailable if the shareholders of a corporation or the corporation itself, or
both, immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than 83 1/3% (or five-sixths)
of the voting power of the surviving or acquiring corporation or its parent
entity. California law generally affords appraisal rights in sale of asset
reorganizations.
Pursuant to California law, appraisal rights are not available to
shareholders of Foothill-California with respect to the Merger.
Dissolution. Under California law, shareholders holding fifty percent (50%)
or more of the total voting power of the Company may authorize the Company's
dissolution, with or without the approval of the Board, and this right may not
be modified by the Foothill-California Charter. Under Delaware law, without the
Board's approval of a dissolution of the Company, a dissolution must be
unanimously approved by all the shareholders entitled to vote thereon, while a
dissolution that is approved by the Board only requires the approval of a simple
majority of such shareholders. In the event of such a Board-initiated
dissolution, Delaware law allows the Company to include in the Foothill-Delaware
Charter a supermajority (greater than
16
<PAGE> 20
a simple majority) voting requirement in connection with dissolutions. The
Foothill-Delaware Charter does not contain a supermajority voting requirement in
connection with dissolutions.
Interested Director Transactions. Under both California and Delaware law,
certain contracts or transactions in which one or more of the Company's
directors has an interest are not void or voidable because of such interest,
provided that certain conditions, such as obtaining the required approval and
fulfilling the requirements of good faith and full disclosure, are met. With
certain minor exceptions, the conditions are similar under California and
Delaware law.
Shareholder Derivative Suits. California law provides that a shareholder
bringing a derivative action on behalf of the Company need not have been a
shareholder at the time of the transaction in question, provided that certain
tests are met. Under Delaware law, a shareholder may bring a derivative action
on behalf of the Company only if the he or she was a shareholder of the Company
at the time of the transaction in question or if his or her stock thereafter
devolved upon him or her by operation of law. California law also provides that
the Company or the defendant in a derivative suit may make a motion to the court
for an order requiring the plaintiff shareholder to furnish a security bond,
while Delaware law does not.
Application of the California General Corporation Law to Delaware
Corporations. Under Section 2115 of the California law, certain foreign
corporations (i.e., corporations not organized under California law) which have
significant contacts with California are subject to a number of key provisions
of the California law. However, an exemption from Section 2115 is provided for a
corporation whose shares are qualified as a national market security on the
Nasdaq Stock Exchange and if the corporation has at least 800 holders of its
equity securities as of the record date for its most recent shareholder meeting.
Following the Proposed Reincorporation, the Company's Common Stock will continue
to be qualified on the Nasdaq National Market and, accordingly,
Foothill-Delaware would be exempt from Section 2115 so long as it had more than
800 holders of its equity securities.
Certain Federal Income Tax Consequences. The following is a discussion of
certain federal income tax considerations that may be relevant to holders of
Foothill-California Common Stock who receive Foothill-Delaware Common Stock in
exchange for their Foothill-California Common Stock as a result of the Proposed
Reincorporation. The discussion does not address all of the tax consequences of
the Proposed Reincorporation that may be relevant to particular
Foothill-California shareholders, such as dealers in securities, or those
Foothill-California shareholders who acquired their shares upon the exercise of
stock options, nor does it address the tax consequences to holders of options or
warrants to acquire Foothill-California Common Stock. Furthermore, no foreign,
state or local tax considerations are addressed herein. In view of the varying
nature of such tax consequences, each shareholder is urged to consult his or her
own tax advisor as to the specific tax consequences of the Proposed
Reincorporation, including the applicability of federal, state, local or foreign
tax laws.
Subject to the limitations, qualifications and exceptions described herein,
and assuming the Proposed Reincorporation qualifies as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), the following tax consequences generally should result:
(a) No gain or loss should be recognized by holders of
Foothill-California Common Stock upon receipt of Foothill-Delaware Common
Stock under the Proposed Reincorporation;
(b) The aggregate tax basis of Foothill-Delaware Common Stock received
by each shareholder in the Proposed Reincorporation should be equal to the
aggregate tax basis of Foothill-California Common Stock surrendered in
exchange therefor; and
(c) The holding period of Foothill-Delaware Common Stock received by
each shareholder of Foothill-California should include the period for which
such shareholder held Foothill-California Common Stock surrendered in
exchange therefor, provided that such Foothill-California Common Stock was
held by the shareholder as a "capital asset" (as defined in Section 1221 of
the Code) at the time of the Proposed Reincorporation.
17
<PAGE> 21
The Company does not intend to request a ruling from the Internal Revenue
Service (the "IRS") with respect to the federal income tax consequences of the
Proposed Reincorporation under the Code. The Company will, however, receive an
opinion from the Company's general tax counsel substantially to the effect that
the Proposed Reincorporation will qualify as a reorganization within the meaning
of Section 368(a) of the Code (the "Tax Opinion"). The Tax Opinion will neither
bind the IRS nor preclude it from asserting a contrary position. In addition,
the Tax Opinion will be subject to certain assumptions and qualifications and
will be based in part upon the truth and accuracy of representations made by
Foothill-California and its wholly-owned Delaware subsidiary. Of particular
importance will be assumptions and representations relating to the requirement
under Section 368 of the Code that, after the Proposed Reincorporation, the
shareholders of Foothill-California retain, through ownership of
Foothill-Delaware stock, a significant equity interest in the assets previously
held by Foothill-California (the "continuity of interest" requirement).
A successful IRS challenge to the reorganization status of the Proposed
Reincorporation (in consequence of a failure to satisfy the "continuity of
interest" requirement or otherwise) would result in a shareholder recognizing
gain or loss with respect to each share of Foothill-California Common Stock
exchanged in the Proposed Reincorporation equal to the difference between (i)
the shareholder's basis in such share and (ii) the fair market value, as of the
time of the Proposed Reincorporation, of Foothill-Delaware Common Stock received
in exchange therefor. In such event, a shareholder's aggregate basis in the
shares of Foothill-Delaware Common Stock received in the exchange would equal
their fair market value on such date, and the shareholder's holding period for
such shares would not include the period during which the shareholder held
Foothill-California Common Stock.
State, local and foreign income tax consequences to shareholders may vary
from the federal tax consequences described above.
The Company does not expect to recognize gain or loss for federal income
tax purposes as a result of the Proposed Reincorporation, and Foothill-Delaware
should succeed, without adjustment, to the federal income tax attributes of
Foothill-California.
REGULATORY REQUIREMENTS
Before the Proposed Reincorporation can be consummated, the Company will
need to obtain the approval (or a waiver of approval requirements) from (i) the
Board of Governors of Federal Reserve System, which regulates companies
acquiring and owning stock of a bank ("bank holding companies"); and (ii) the
California Commissioner of Financial Institutions, because Foothill-Delaware
will acquire ownership of Foothill Independent Bank from Foothill-California on
the consummation and as a consequence of the Reincorporation Merger.
Applications for those approvals or waivers have been or will be filed prior to
the Special Meeting. The Company has no reason to believe that it will not be
able to obtain those approvals. If, however, it cannot, or any burdensome
conditions are imposed on Foothill-Delaware or Foothill Independent Bank in
connection with such approvals or waivers, Foothill-California may choose to
abandon the Proposed Reincorporation.
BOARD RECOMMENDATION AND VOTE REQUIRED
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSED
REINCORPORATION. The affirmative "FOR" vote of the holders of a majority of the
shares of the Company's Common Stock outstanding on the Record Date is required
for approval of the Proposed Reincorporation, which will also constitute
approval of the Merger Agreement, the Certificate of Incorporation of
Foothill-Delaware, the Foothill-Delaware Bylaws, the Foothill-Delaware Officer
and Director Indemnification Agreement and all provisions thereof.
18
<PAGE> 22
PROPOSAL NO. 2
ELIMINATION OF CUMULATIVE VOTING
(ITEM NO. 2 ON PROXY CARD)
The Board has come to believe, as a result of the Basswood proxy contest,
that especially in publicly-held companies:
- the presence on the Board of one or more directors representing one or a
group of minority shareholders seeking to advance their own special
interests could disrupt the functioning of the Board and therefore impair
the efficient management of the Company.
- cumulative voting in the election of directors can serve to encourage
special interest groups among the shareholders to resort to expensive and
disruptive proxy contests to advance their own interests, even if they
are opposed by a majority of the shareholders.
- each director should represent the interests of all of the shareholders
rather than the interests of a special constituency, and
- directors are more likely to represent the interests of all of the
shareholders rather than the interests of a special constituency if, in
order to win election to the Board, they must obtain the support and vote
of shareholders owning a majority of the shares voted in the election of
directors.
As a result, the Board has approved and is recommending that shareholders
adopt a proposal, at the Special Meeting, designated as Proposal No. 2, to
eliminate cumulative voting in the election of directors and thereby insure that
all directors are elected by majority vote of the shareholders.
If this Proposal is adopted by the shareholders, beginning with the next
annual shareholders meeting, directors will be elected by majority vote rather
than by cumulative vote, whether or not the Proposed Reincorporation is approved
and implemented. If, on the other hand, Proposal No. 2 is not adopted,
shareholders will be entitled to elect directors by cumulative voting whether or
not the Proposed Reincorporation is approved and implemented. See "PROPOSAL NO.
1 -- PROPOSED REINCORPORATION -- Reduced Vulnerability to Unsolicited Takeover
Attempts and Contests for Control -- Elimination of Cumulative Voting."
Because Foothill-California's shares trade on the NASDAQ National Market
and it has more than 800 record holders of its shares, it is eligible under
California law to eliminate cumulative voting.
For the foregoing reasons, the Board concluded that it should seek approval
of the shareholders to eliminate cumulative voting whether or not the Proposed
Reincorporation is approved and implemented.
The Board does recognize and has considered that, if approved by
shareholders, elimination of cumulative voting would make it more difficult for
minority shareholders, adverse to a majority of the shareholders, to obtain
representation on the Company's Board of Directors. However, the Board of
Directors believes that the benefits of taking this action outweigh these
disadvantages, because elimination of cumulative voting will:
- make it more likely that minority shareholders seeking representation on
the Board will present their views and reasons for doing so to the Board
of Directors, who can then evaluate their intentions and the
qualifications of their proposed nominees, and the benefits and
detriments to the Company and all of its shareholders of nominating them
for election to the Board;
- deter expensive and disruptive proxy contests that are initiated to
promote the interests of a special constituency of shareholders over
those of the shareholders as a whole;
- prevent a small minority of shareholders from frustrating the will of the
vast majority of shareholders, as Basswood attempted to do last year by
means of an expensive proxy contest.
19
<PAGE> 23
BOARD RECOMMENDATION AND VOTE REQUIRED
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELIMINATION
OF CUMULATIVE VOTING IN ELECTIONS OF DIRECTORS. Adoption of the amendment to the
Articles of Incorporation of Foothill-California requires the affirmative vote
of a majority of the outstanding shares of Foothill-California's common stock.
An abstention or the failure of a broker or other nominee holder of shares to
vote the shares they hold of record will have the same effect as a vote against
this Proposal.
PROPOSAL NO. 3
INCREASE IN AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
(ITEM NO. 3 ON PROXY CARD)
The Board of Directors has adopted, subject to shareholder approval, an
amendment to Foothill-California's Articles of Incorporation, that would
increase the Company's authorized number of shares of Common Stock from
12,500,000 shares to 25,000,000 shares, in case the Reincorporation Proposal is
not approved. The common shares would be no par value shares as is customary in
California. In all other respects, the amended provisions of
Foothill-California's Articles of Incorporation relating to its authorized
shares of Common Stock would be identical to the provisions contained in Article
IV of Foothill-Delaware's Charter relating to its authorized shares of Common
Stock that is attached as Exhibit A to this Proxy Statement.
As of March 17, 2000, [5,762,656] shares of Common Stock were issued and
outstanding and a total of additional shares of Common Stock were
reserved for issuance on future acquisitions of shares under stock option and
stock purchse plans and a dividend reinvestment plan. Thus, as of that date, the
Company had approximately shares of Common Stock available for
issuance. The proposed increase in the number of authorized shares of Common
Stock from 12,500,000 to 25,000,000 would result in additional common shares
being available for issuance from time to time for a number of corporate
purposes, such as possible stock splits, stock dividends, acquisitions of
companies or assets, sales of stock or securities convertible into stock and
issuances pursuant to stock option or other employee benefit plans and dividend
reinvestment programs. The Company currently has no specific plans, arrangements
or understanding with respect to the issuance of these additional shares. The
Company believes that the availability of the additional common shares will
provide it with the flexibility to meet business needs as they arise, to take
advantage of favorable acquisition and financing opportunities and to respond to
a changing corporate environment.
If this Proposal is approved by the Company's shareholders, no further
shareholder vote or action will be necessary for the issuance of additional
common shares, unless required by California law or Nasdaq rules. In general,
California law and Nasdaq rules would require that the issuance of common shares
in a merger or business combination or other transaction be approved by the
Company's shareholders at an annual or a special meeting of the shareholders if
the shares of Common Stock issued would increase the shares of Common Stock
outstanding by twenty percent (20%) or more.
Possible Effects of Adoption of Proposal. The increase in the authorized
number of common shares could affect the ability of a third party to gain voting
control of the Company, because the Board of Directors would be able to
authorize the issuance, in a private placement or otherwise, of shares of Common
Stock to one or more persons and, thereby, dilute the voting power of a
potential acquiror without first having to obtain shareholder approval. In this
situation, the issuance of common shares could adversely affect a potential
takeover bid or contest for control.
At this time, there are no specific plans, commitments, agreements or
arrangements to issue any shares of Common Stock in addition to those reserved
for future issuance, as described above, either as defensive or anti-takeover
measures or for any other purpose.
20
<PAGE> 24
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
Adoption of the amendment to the Company's Articles of Incorporation
requires the affirmative vote of a majority of the shares of the Company's
Common Stock outstanding on the Record Date. An abstention or the failure of a
broker or other nominee to vote shares held of record will have the same effect
as a vote against the proposal. THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK.
TEXT OF AMENDMENT
The Proposal would approve an amendment to Article Four of the Articles of
Incorporation of Foothill-California relating to its authorized shares of Common
Stock such that it would be identical to the text of Article IV of the
Foothill-Delaware Charter attached as Exhibit A hereto relating to its
authorized shares of Common Stock, except that the common shares would not
include a designation of par value.
PROPOSAL NO. 4
CREATION OF A NEW CLASS OF PREFERRED STOCK
(ITEM NO. 4 ON PROXY CARD)
The Board of Directors has adopted, subject to shareholder approval, an
amendment to Foothill-California's Articles of Incorporation, that would create
a new class of 10,000,000 shares of preferred stock in case the Reincorporation
Proposal is not approved. The newly authorized preferred shares would be no par
value shares as is customary in California.
If this Proposal is approved and implemented, but the Proposed
Reincorporation is not, then, the preferred shares will be issuable from time to
time in one or more series as determined by the Board of Directors of
Foothill-California without further vote or action by the shareholders. Dividend
rates, conversion rights, if any, liquidation preferences, rights and terms of
redemption (including sinking fund provisions) and redemption prices will also
be determined by the Board of Directors of Foothill-California at the time that
any preferred shares are issued.
The Board of Directors believes that the availability of authorized but
unissued preferred shares can be of considerable value by providing an
alternative form of consideration in connection with the raising of capital or
the acquisition of other businesses through the issuance of securities by the
Company, the terms and characteristics of which can be determined by the Board
of Directors at the time of actual issuance based on market conditions and to
meet other circumstances then existing.
If this Proposal is approved by the Company's shareholders, no further
shareholder vote or action will be necessary for the issuance of preferred
shares, unless required by California law or NASDAQ rules. In general,
California law and NASDAQ rules would require that the issuance of preferred
shares in a merger or business combination or other transaction be approved by
the Company's shareholders at an annual or a special meeting of the shareholders
if the preferred shares could be converted into a number of shares of Common
Stock that would increase the shares of Common Stock outstanding by twenty
percent (20%) or more. The issuance of preferred shares may affect the rights of
existing shareholders by diluting their percentage interests of Common Stock, if
the preferred shares are convertible into Common Stock; granting the holders of
preferred shares preferences as to dividends or proceeds on liquidation; and
diluting their voting rights if the preferred shares provide for voting rights.
Possible Effects of Adoption of Proposal. The availability of authorized
but unissued preferred shares could affect the ability of a third party to gain
voting control of the Company, because the Board of Directors would be able to
authorize the issuance, in a private placement or otherwise, of preferred shares
with voting rights to one or more persons and, thereby, dilute the voting power
of a potential acquiror without first having to obtain shareholder approval.
Additionally, unissued preferred shares would be available in connection with
the adoption of a shareholders rights plan pursuant to which the Company would
be able to issue to existing
21
<PAGE> 25
shareholders rights to purchase preferred shares that could be issued in
circumstances that would dilute the equity position of a potential acquiror. In
either of these situations, the issuance of preferred shares could adversely
affect a potential takeover bid.
At this time, there are no specific plans, commitments, agreements or
arrangements to issue any preferred shares, either as defensive or anti-takeover
measures or for any other purpose.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
Adoption of the amendment to the Company's Articles of Incorporation
requires the affirmative vote of a majority of the shares of the Company's
Common Stock outstanding on the Record Date. An abstention or the failure of a
broker or other nominee to vote shares held of record will have the same effect
as a vote against the proposal. THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE CREATION OF AN AUTHORIZED CLASS OF 10,000,000 SHARES
OF PREFERRED STOCK.
TEXT OF AMENDMENT
The Proposal would approve an amendment to Article Four of the Articles of
Incorporation of Foothill-California such that it would be identical to the text
of Article IV of the Foothill-Delaware Charter attached as Exhibit A hereto
relating to its authorized shares of Preferred Stock, except that the preferred
shares would not include a designation of par value.
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information as of March 17, 2000 regarding the
number of shares of the Company's Common Stock owned by (i) each person who we
know owns more than 5% of the outstanding shares of Common Stock of the Company,
(ii) each director and executive officer of the Company and (iii) all directors
and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP CLASS
---------------- -------------------- ----------
<S> <C> <C>
Basswood Partners, L.L.C................................ 553,129(1) 9.60%
Matthew Lindenbaum
Bennett Lindenbaum
645 Madison Avenue, 10th Floor
New York, NY 10022
William V. Landecena.................................... 358,562(2) 6.14%
O.L. Mestad............................................. 259,861(3) 4.45%
George E. Langley....................................... 203,671(4) 3.48%
Tom Kramer.............................................. 119,518(5) 2.05%
Richard Galich.......................................... 125,401(6) 2.17%
Donna Miltenberger...................................... 107,800(7) 1.85%
Max E. Williams......................................... 71,653(8) 1.23%
George Sellers.......................................... 22,113(9) 0.38%*
All Directors and Executive Officers of the Company as a
group (9 in number)................................... 1,294,262(10) 20.70%
</TABLE>
- ---------------
* Less than 1%
(1) Based on information set forth in a report filed on Schedule 13F with the
Securities and Exchange Commission on February 14, 2000 by Basswood, a
Delaware limited liability company, Matthew Lindenbaum and Bennett
Lindenbaum, the managing members of Basswood. Basswood is the general
partner of Basswood Financial Partners, L.P. (the "Partnership"), and
advises Basswood International Fund, Inc., a Cayman Islands exempted
company ("Basswood International"), Whitewood Financial
22
<PAGE> 26
Partners, L.P., a Delaware limited partnership ("Whitewood"), and certain
managed accounts (including 1994 Garden State L.P., a Delaware limited
partnership ("Garden State") and Jet I, L.P., a Delaware limited
partnership ("Jet I")), which, according to that report, owned
beneficially, as of December 31, 1999, 553,029 shares of the Company's
Common Stock. The other 100 shares are owned of record by Bennett
Lindenbaum.
(2) Mr. Landecena is a director of the Company. Includes 81,488 shares of
Common Stock subject to outstanding stock options exercisable during the
60-day period ending May 17, 2000. The shares beneficially owned by Mr.
Landecena include shares held in several trusts established by Mr.
Landecena.
(3) Mr. Mestad is a director of the Company. Includes 84,703 shares subject to
outstanding options exercisable during the 60-day period ending May 17,
2000.
(4) Mr. Langley is a director and an executive officer of the Company. Includes
93,465 shares of Common Stock subject to outstanding stock options
exercisable during the 60-day period ending May 17, 2000.
(5) Mr. Kramer is an executive officer of the Company. Includes 58,951 shares
of Common Stock subject to outstanding stock options exercisable during the
60-day period ending May 17, 2000.
(6) Mr. Gallich is a director of the Company. Includes 14,500 shares of Common
Stock subject to outstanding options exercisable during the 60-day period
ending May 17, 2000.
(7) Ms. Miltenberger is a director and executive officer of the Company.
Includes 66,789 shares of Common Stock subject to outstanding stock options
exercisable during the 60-day period ending May 17, 2000.
(8) Mr. Williams is a director of the Company. Includes 64,071 shares subject
to outstanding options exercisable during the 60-day period ending May 17,
2000.
(9) Mr. Sellers is a director of the Company. Includes 14,500 shares subject to
outstanding options exercisable during the 60-day period ending May 17,
2000.
(10) Includes an aggregate of 492,213 shares of Common Stock subject to
outstanding stock options exercisable during the 60-day period ending May
17, 2000.
OTHER BUSINESS
The Company's Bylaws provide that no other matters or proposals may be
submitted to the shareholders at the Special Meeting other than the business
noticed and described above.
Dated: March [--], 2000 BY ORDER OF THE BOARD OF DIRECTORS,
George E. Langley
President
23
<PAGE> 27
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
FOOTHILL INDEPENDENT BANCORP
------------------------
ARTICLE I -- NAME
The name of this Corporation is: Foothill Independent Bancorp.
ARTICLE II -- REGISTERED OFFICE AND AGENT
The registered office of the Corporation in the State of Delaware is
located 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle, and
Corporation Service Company is the registered agent of the Corporation.
ARTICLE III -- PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law, as amended from time to time.
ARTICLE IV -- AUTHORIZED CAPITAL
The aggregate number of shares of all classes of stock which the
Corporation shall have authority to issue is 35,000,000 shares, consisting of
(a) 25,000,000 shares of Common Stock, $.001 par value per share (the "Common
Stock"), and (b) 10,000,000 shares of Preferred Stock, $.001 par value per share
(the "Preferred Stock").
The Board of Directors is authorized, subject to limitations prescribed by
law, to provide for the issuance of the shares of Preferred Stock in one or more
series, and by filing a certificate as required by the General Corporation Law
of the State of Delaware, to establish from time to time the number of shares to
be included in each such series, and to fix the designation, powers, preferences
and relative, participating, optional or other special rights of the shares of
each such series and any qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends shall
be cumulative and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the voting
rights provided by law and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable and the amount per share payable in
case of redemption, which amount may vary under different conditions and at
different redemption dates;
A-1
<PAGE> 28
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series and, if so, the terms and amount of such
sinking fund; and
(g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series.
ARTICLE V -- LIMITATION OF DIRECTORS' LIABILITY
A director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision shall not eliminate or limit
the liability of a director: (i) for any breach of his duty of loyalty to the
Corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law; (iii)
under Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derives an improper personal benefit. If the
Delaware General Corporation Law is hereafter amended to authorize corporate
action further limiting or eliminating the personal liability of directors, then
the liability of the directors of the Corporation shall be limited or eliminated
to the fullest extent permitted by the Delaware General Corporation Law, as so
amended from time to time. Any repeal or modification of this Article V by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
ARTICLE VI -- DIRECTORS
The number of directors that constitute the whole Board of Directors of the
Corporation, the manner in which they shall be elected, their respective terms
of office and their removal from office shall be as provided in the Bylaws of
the Corporation.
ARTICLE VII -- AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware, the Board of Directors of the Corporation shall have the
power and authority to make, alter, amend, change, add to or repeal the Bylaws
of the Corporation. The Bylaws of the Corporation may also be altered, amended,
changed, added to or repealed by the affirmative vote of not less than sixty-six
and two thirds percent (66 2/3%) of the outstanding voting stock of the
Corporation entitled to vote on such matters, voting together as a single class.
ARTICLE VIII -- SPECIAL MEETINGS AND ACTION BY STOCKHOLDERS
The only persons entitled to call a special meeting of the Corporation's
stockholders are those persons named in the Corporation's Bylaws.
No action that is required or permitted to be taken by the stockholders of
the Corporation at any annual or special meeting of the stockholders may be
taken by written consent of the stockholders in lieu of a meeting of the
stockholders, unless the action to be effectuated by written consent of
stockholders, and also the taking of such action by such written consent, shall
have expressly been approved in advance by the Board of Directors of the
Corporation.
Notwithstanding anything contained in this Certificate of Incorporation to
the contrary, the affirmative vote of not less than sixty-six and two-thirds
percent (66 2/3%) of the voting shares of this Corporation, voting together as a
single class, shall be required to amend, repeal or adopt any provision
inconsistent with this Article VIII.
A-2
<PAGE> 29
ARTICLE IX -- INCORPORATOR
The name and address of the Incorporator of the Corporation is as follows:
Mark L. Skaist
660 Newport Center Drive
Suite 1600
Newport Beach, California 92660-6441
I, THE UNDERSIGNED, being the Incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and accordingly, have hereunto set my hand this day of ,
2000.
/s/ Mark L. Skaist
Mark L. Skaist
A-3
<PAGE> 30
EXHIBIT B
FOOTHILL-DELAWARE BYLAWS
BYLAWS
OF
FOOTHILL INDEPENDENT BANCORP
A DELAWARE CORPORATION
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the Corporation in
the State of Delaware shall be fixed in the Certificate of Incorporation of the
Corporation.
SECTION 2. PRINCIPAL EXECUTIVE OFFICE. The Corporation's principal
executive office shall be fixed and located at such place, either within or
without the State of Delaware, as the Board of Directors of the Corporation
shall determine. The Board of Directors is granted full power and authority to
change said principal executive office from one location to another.
SECTION 3. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
SECTION 4. BOOKS. The books of the Corporation may be kept within or
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of stockholders shall be held at
such place either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors.
SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders, for the
purpose of electing directors and transacting such other business as may
properly be brought before the meeting, shall be held on such date and time as
shall be designated from time to time by the Board of Directors.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders, for any
purpose or purposes, may only be called only by the Board of Directors, the
Chairman of the Board or the President of the Corporation, and may not be called
by any other person or persons. Only such business shall be conducted at a
special meeting of the stockholders as shall have been brought before the
meeting pursuant to the Corporation's notice of meeting.
SECTION 4. NOTIFICATION OF BUSINESS TO BE TRANSACTED AT MEETING. To be
properly brought before an annual meeting, business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder entitled to vote at the meeting.
For business to be properly brought before an annual meeting by a
stockholder under sub-category (c) of this Section 4, the stockholder must have
given timely notice thereof in writing to the Secretary of the Corporation, the
stockholder must have been a stockholder of record at the time the notice was
given, and any such proposed business must constitute a proper matter for
stockholder action. A stockholder's notice is timely only if it has been
received by the Secretary of the Corporation not less than sixty (60) nor more
than ninety (90) days prior to the first anniversary of the preceding year's
annual meeting of stockholders. In the event that the date of the annual meeting
of stockholders is advanced or delayed by more than thirty (30) days from such
anniversary, notice by the stockholder to be timely must be received by the
Secretary of the Corporation
B-1
<PAGE> 31
not earlier than the seventy-fifth (75th) day prior to such annual meeting and
not later than the close of business on the later of the forty-fifth (45th) day
prior to such annual meeting or the tenth (10th) day following the day on which
notice of the changed date of the annual meeting was mailed or public disclosure
thereof was made by the Corporation, whichever first occurs. Such stockholder's
notice shall set forth a brief description of the business desired to be brought
before the meeting, the text of the proposal or business (including the text of
any resolutions proposed for consideration and, in the event that such business
includes a proposal to amend the Bylaws of the Corporation, the language of the
proposed amendment), the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and beneficial owner,
if any, on whose behalf the proposal is made. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a notice by a
stockholder was not made in accordance with the procedures prescribed by this
Section 4, and if he or she should so determine, the defective notice and its
contents shall be disregarded.
SECTION 5. NOMINATIONS AND ELECTIONS OF DIRECTORS.
(A) Nominations for the election of directors shall be made by a nominating
committee of the Board of Directors if then constituted pursuant to these
Bylaws, or if no nominating committee has been constituted, by the Board of
Directors. Any stockholder who desires that such committee or the Board of
Directors consider any person for nomination by the Board of Directors as a
candidate for election to the Board of Directors may send a written notice to
the Secretary of the Corporation, which identifies such proposed nominee or
nominees and contains the information set forth below in clauses (i) through
(vi) of this Section 5. In addition, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons for election as
directors at an annual meeting of stockholders, but only if written notice of
such stockholder's intent to make such nomination or nominations has been
received by the Secretary of the Corporation not less than sixty (60) nor more
than ninety (90) days prior to the first anniversary of the preceding year's
annual meeting of stockholders. In the event that the date of the annual meeting
of stockholders is advanced or delayed by more than thirty (30) days from such
anniversary, notice by the stockholder to be timely must be received by the
Secretary of the Corporation not earlier than the seventy-fifth (75th) day prior
to such annual meeting and not later than the close of business on the later of
the forty-fifth (45th) day prior to such annual meeting or the tenth (10th) day
following the day on which notice of the changed date of the annual meeting was
mailed or public disclosure thereof was made by the Corporation, whichever first
occurs. Each notice by a stockholder given under this Section 5 shall set forth:
(i) the name and address of the stockholder who intends to make the nomination
and of the person or persons to be nominated; (ii) a representation that the
stockholder is a holder of record of stock of the Corporation entitled to vote
and intends to appear in person or by proxy at such meeting to nominate the
person or persons specified in the notice; (iii) a description of all
arrangements or understandings between the stockholder or any person that
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such stockholder (an "Affiliate"
of such stockholder) and each nominee and any other person or persons (naming
such person or persons) relating to the nomination or nominations; (iv) the
class, series and number of shares of the Corporation that are owned by such
stockholder and the person to be nominated as of the date of such stockholder's
notice and by any other stockholders known by such stockholder to be supporting
such nominees as of the date of such stockholder's notice; (v) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission for a meeting of stockholders at which
directors are to be elected; and (vi) the written consent of each nominee to
serve as a director of the Corporation if so elected. Any stockholder who
desires to nominate one or more persons for election as directors at an annual
meeting of stockholders also shall comply with all applicable requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder, with respect to the matters set forth in this
Section 5.
(B) No person who is proposed to be nominated by a stockholder at an annual
stockholders meeting shall be eligible for election as a director of the
Corporation at such meeting unless nominated in accordance with the applicable
procedures set forth in this Section 5. The Chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures
B-2
<PAGE> 32
prescribed by this Section 5, and if he or she should so determine, the
defective nomination shall be disregarded.
SECTION 6. NOTICE; WAIVER OF NOTICE. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise required by law, such notice shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the Corporation. A written waiver of any such notice signed by the
person entitled thereto, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
In the case of an annual meeting, the notice of meeting shall contain those
matters that the Board of Directors, at the time of mailing of the notice,
intends to present for action by the stockholders, provided, however, that
subject to the provisions of applicable law, any other matters may be presented
for action by the Board of Directors at the meeting. In the case of a special
meeting, the notice of meeting shall contain the purpose or purposes for which
the meeting was called.
SECTION 7. QUORUM; ADJOURNMENT. Except as otherwise required by law, or
provided by the Certificate of Incorporation or these Bylaws, the holders of a
majority of the capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of the stockholders. A meeting
at which a quorum is initially present may continue to transact business,
notwithstanding the withdrawal of enough votes to leave less than a quorum, if
any action taken is approved by at least a majority of the required quorum to
conduct that meeting. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the majority of the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting of the time and place of the adjourned meeting,
until a quorum shall be present or represented. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder entitled to vote at the meeting.
SECTION 8. VOTING. Any matter brought before a meeting of stockholders at
which a quorum is present shall, unless otherwise provided by law, the
Certificate of Incorporation or these Bylaws, be decided by the vote of the
holders of a majority of the stock represented and entitled to vote thereon.
Unless otherwise provided in the Certificate of Incorporation, each stockholder
represented at a meeting of stockholders shall be entitled to cast one vote for
each share of the capital stock entitled to vote thereat held by such
stockholder. Elections of directors need not be by ballot unless the Chairman of
the meeting so directs or unless a stockholder demands election by ballot at the
meeting and before the voting begins. The stockholders of the Corporation shall
not have the right to cumulate their votes for the election of directors of the
Corporation.
SECTION 9. PROXIES. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three (3) years from
its date, unless the proxy provides for a longer period. A proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or by delivering a proxy in accordance with applicable law bearing a later
date to the Secretary of the Corporation.
SECTION 10. ACTION WITHOUT MEETING. If and to the extent permitted by the
Certificate of Incorporation, any action which may be taken at any annual or
special meeting of stockholders may be taken without a
B-3
<PAGE> 33
meeting and without prior notice if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. Every written consent shall bear
the date of signature of each stockholder who signs the consent and no written
consent shall be effective to take the corporate action referred to therein
unless, within sixty (60) days of the earliest dated consent delivered to the
Corporation in the manner required by the Delaware General Corporation Law,
written consents signed by a sufficient number of stockholders to take such
action are delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
SECTION 11. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting. Stockholders on the record date are entitled to
notice and to vote or to receive the dividend, distribution or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the Corporation after the record date,
except as otherwise provided by agreement or by applicable law.
If no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived at the close
of business on the business day next preceding the day on which the meeting is
held. The record date for determining stockholders for any purpose other than
set forth in this Section 11 shall be at the close of business on the day on
which the Board adopts the resolution relating thereto, or the sixtieth (60th)
day prior to the date of such other action, whichever is later.
SECTION 12. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer who has
charge of the stock ledger of the Corporation shall prepare and make, at least
ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present. The stock ledger
of the Corporation shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list required by this Section or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 13. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint one or more persons as
inspectors of election to act at the meeting or any adjournment thereof. If an
inspector or inspectors are not so appointed, or if an appointed inspector fails
to appear or fails or refuses to act at a meeting, the Chairman of any meeting
of stockholders may, and on the request of any stockholder or his proxy shall,
appoint an inspector or inspectors of election at the meeting. The duties of
such inspector(s) shall include: determining the number of shares outstanding
and the voting power of each; the shares
B-4
<PAGE> 34
represented at the meeting; the existence of a quorum; the authenticity,
validity and effect of proxies; receiving votes, ballots or consents; hearing
and determining all challenges and questions in any way arising in connection
with the right to vote; counting and tabulating all votes or consents;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all stockholders. In the event of any dispute between
or among the inspectors, the determination of the majority of the inspectors
shall be binding.
SECTION 14. CONDUCT OF MEETING. At each meeting of stockholders the
Chairman of the Board of Directors, if one shall have been elected (or in his
absence or if one shall not have been elected, the President) shall act as
Chairman of the meeting. The Secretary (or in his or her absence or inability to
act, the person whom the Chairman of the meeting shall appoint Secretary of the
meeting) shall act as Secretary of the meeting and keep the minutes thereof. The
order and manner of transacting business at all meetings of stockholders
including the time when polls for voting shall open and shall be closed, shall
be determined by the Chairman of the meeting.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. Except as otherwise required by law or provided by the
Certificate of Incorporation, the business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors.
SECTION 2. NUMBER AND ELECTION OF DIRECTORS. Subject to any limitations in
the Certificate of Incorporation, the authorized number of directors of the
Corporation shall be fixed from time to time by the Board of Directors either by
a resolution or an amendment to this Bylaw duly adopted by the Board of
Directors. Until changed in the foregoing manner, the number of directors shall
be seven (7). Directors shall be elected at each annual meeting of stockholders
to replace directors whose terms then expire, and, subject to the provisions of
Section 3 of this Article III, each director elected shall hold office for a
term of three (3) years or until his successor is duly elected and qualified,
or, if earlier, until his or her death, resignation or removal. Any director may
resign at any time effective upon giving written notice to the Board of
Directors, unless the notice specifies a later time for such resignation to
become effective. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. If the resignation of a
director is effective at a future time, the Board of Directors may elect a
successor prior to such effective time to take office when such resignation
becomes effective. Directors need not be stockholders of the Corporation.
SECTION 3. CLASSIFIED BOARD OF DIRECTORS. The Board of Directors, shall be
divided into three (3) Classes, as nearly equal in number as possible,
designated Class I, Class II and Class III. The number of directors constituting
each Class shall be fixed from time to time by a resolution duly adopted by the
Board of Directors. The initial Class I and Class II Directors shall be elected
at the first annual meeting of the stockholders following the filing of this
Certificate of Incorporation and shall serve for a initial terms of two years
and three years thereafter, respectively, expiring at the third and fourth
annual meetings of the stockholders following the filing of this Certificate of
Incorporation, respectively. The initial Class III directors shall be elected at
the second annual meeting of the stockholders following the filing of this
Certificate of Incorporation and shall serve for an initial term of three years
thereafter, expiring at the fifth annual meeting of the stockholders following
the filing of this Certificate of Incorporation. At each annual meeting of the
stockholders following the filing of this Certificate of Incorporation,
commencing on the third annual meeting following the filing of this Certificate
of Incorporation, the successors of the Class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of the stockholders to be held in the third year following the year of
their election, with each director in each such Class to hold office until his
or her successor is duly elected and qualified. If any such annual meeting is
not held, the directors may be elected at any special meeting of stockholders
held, at the direction of the Board of Directors, for that purpose.
SECTION 4. REMOVAL. Directors may be removed from office by the holders of
a majority of the outstanding shares entitled to vote in an election of
directors, but only with cause.
B-5
<PAGE> 35
SECTION 5. VACANCIES. Subject to the limitations in the Certificate of
Incorporation or elsewhere in these Bylaws, vacancies in the Board of Directors
resulting from death, resignation, removal or otherwise and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, although less than
a quorum or, if there is only one remaining director, by that director. Each
director so selected shall hold office for the remainder of the full term of
office of the former director which such director replaces and until his
successor is duly elected and qualified or, if earlier, until his or her death,
resignation or removal. No decrease in the authorized number of directors
constituting the Board of Directors shall shorten the term of any incumbent
directors.
SECTION 5. TIME AND PLACE OF MEETINGS. The Board of Directors shall hold
its meetings at such place, either within or without the State of Delaware, and
at such time as may be determined from time to time by the Board of Directors.
SECTION 6. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
place, either within or without the State of Delaware, on such date and at such
time as shall be specified in a notice thereof given as hereinafter provided in
Section 8 of this Article III or in a waiver of notice thereof.
SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held at such places within or without the State of Delaware at such date and
time as the Board of Directors may from time to time determine and, if so
determined by the Board of Directors, notices thereof need not be given.
SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by the Chairman of the Board, the President, or by any two (2)
directors. Notice of the date, time and place of special meetings shall be
delivered personally or by telephone to each director or sent by first-class
mail or telegram, charges prepaid, addressed to each director at the director's
address as it is shown on the records of the Corporation. In case the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. In case the notice is delivered
personally or by telephone or telegram, it shall be delivered personally or by
telephone or to the telegraph company at least forty-eight (48) hours before the
time of the holding of the meeting. The notice need not specify the purpose of
the meeting. A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 9. QUORUM; VOTE REQUIRED FOR ACTION; ADJOURNMENT. Except as
otherwise required by law, or provided in the Certificate of Incorporation or
these Bylaws, a majority of the directors shall constitute a quorum for the
transaction of business at all meetings of the Board of Directors and the
affirmative vote of not less than a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors.
If a quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting, from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
A meeting at which a quorum is initially present may continue to transact
business, notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum to conduct that meeting.
When a meeting is adjourned to another time or place (whether or not a quorum is
present), notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the Board of Directors may transact any business which
might have been transacted at the original meeting.
SECTION 10. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by the
Certificate of Incorporation, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all the members of the Board of Directors or committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or committee.
B-6
<PAGE> 36
SECTION 11. TELEPHONE MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, members of the Board of Directors of the
Corporation, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee, as the
case may be, by conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section 11 shall constitute presence
in person at such meeting.
SECTION 12. COMMITTEES. The Board of Directors may, by resolution passed by
a majority of the entire Board, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate members of any such
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the event of absence or disqualification of a member of a
committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the committee
member or members present at any meeting and not disqualified from voting,
whether or not he/she or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
the absent or disqualified member. Any such committee, to the extent provided by
resolution of the Board of Directors or in the Bylaws of the Corporation, shall
have and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to the
following matters: (i) approving or adopting, or recommending to the
stockholders, any action or matter expressly required by law to be submitted to
the stockholders for approval, or (ii) adopting, amending or repealing any Bylaw
of the Corporation. Each committee shall keep regular minutes of its meetings
and report to the Board of Directors when required.
SECTION 13. COMPENSATION. The directors may be paid such compensation for
their services as the Board of Directors shall from time to time determine.
SECTION 14. INTERESTED DIRECTORS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other Corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or the committee thereof
which authorizes the contract or transaction, or solely because his/her or their
votes are counted for such purpose if: (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a President,
a Secretary and a Chief Financial Officer. The Corporation may also have, at the
discretion of the Board of Directors, a Chairman of the Board, a Vice Chairman
of the Board, a Chief Executive Officer, one or more Vice Presidents, one or
more Assistant Financial Officers and Treasurers, one or more Assistant
Secretaries and such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article IV.
B-7
<PAGE> 37
SECTION 2. APPOINTMENT OF OFFICERS. The officers of the Corporation, except
such officers as may be appointed in accordance with the provisions of Section 3
or Section 5 of this Article IV, shall be appointed by the Board of Directors,
and each shall serve at the pleasure of the Board, subject to the rights, if
any, of an officer under any contract of employment.
SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may appoint, and
may empower the Chief Executive Officer, if one is appointed, or President, to
appoint such other officers as the business of the Corporation may require, each
of whom shall hold office for such period, have such authority and perform such
duties as are provided in the Bylaws or as the Board of Directors may from time
to time determine.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights of an
officer under any contract, any officer may be removed at any time, with or
without cause, by the Board of Directors or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors. Any officer may resign at any time by
giving written notice to the Corporation. Any resignation shall take effect at
the date of the receipt of that notice or at any later time specified in that
notice; and, unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights of the Corporation under any contract to
which the officer is a party.
SECTION 5. VACANCIES IN OFFICES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular appointments to that office.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer is appointed, shall, if present, preside at meetings of the stockholders
and of the Board of Directors. He or she shall, in addition, perform such other
functions (if any) as may be prescribed by the Bylaws or the Board of Directors.
SECTION 7. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Corporation, if such an officer is appointed, shall, subject to the control of
the Board of Directors, have general supervision, direction and control of the
business and the officers of the Corporation. He or she shall exercise the
duties usually vested in the chief executive officer of a Corporation and
perform such other powers and duties as may be assigned to him/her from time to
time by the Board of Directors or prescribed by the Bylaws. In the absence of
the Chairman of the Board and any Vice Chairman of the Board, the Chief
Executive Officer shall preside at all meetings of the stockholders and of the
Board of Directors.
SECTION 8. PRESIDENT. The President of the Corporation shall, subject to
the control of the Board of Directors and the Chief Executive Officer of the
Corporation, if there be such an officer, have general powers and duties of
management usually vested in the office of president of a Corporation and shall
have such other powers and duties as may be prescribed by the Board of Directors
or the Bylaws or the Chief Executive Officer of the Corporation. In the absence
of the Chairman of the Board, Vice Chairman of the Board and Chief Executive
Officer, the President shall preside at all meetings of the Board of Directors
and stockholders.
SECTION 9. VICE PRESIDENT. In the absence or disability of the President,
the Vice Presidents, if any, in order of their rank as fixed by the Board of
Directors or, if not ranked, a Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the Bylaws, and the President, or the Chairman of the
Board.
SECTION 10. SECRETARY. The Secretary shall keep or cause to be kept, at the
principal executive office or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of Directors, committees
of Directors, and stockholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice given, the names
of those present at Directors' meetings or committee meetings, the number of
shares present or represented at stockholders' meetings, and a summary of the
proceedings.
B-8
<PAGE> 38
The Secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the Corporation's transfer agent or registrar, or
such other place as the Board of Directors may direct, as determined by
resolution of the Board of Directors, a share register, or a duplicate share
register, showing the names of all stockholders and their addresses, the number
and classes of shares held by each, the number and date of certificates issued
for the same, and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the Board of Directors required by the Bylaws or by law
to be given, and he shall keep or cause to be kept the seal of the Corporation
in safe custody, and shall have such powers and perform such other duties as may
be prescribed by the Board of Directors or by the Bylaws.
SECTION 11. CHIEF FINANCIAL OFFICER. Unless the Board of Directors
specifies otherwise, the Chief Financial Officer shall be the Treasurer of the
Corporation and shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the Corporation. The Chief Financial Officer shall
deposit all moneys and other valuables in the name and to the credit of the
Corporation with such depositories as may be designated by the Board of
Directors. He or she shall make such disbursements of the funds of the
Corporation as are authorized and shall render from time to time an account of
all of his or her transactions as Chief Financial Officer and of the financial
condition of the Corporation. The Chief Financial Officer shall also have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or the Bylaws.
ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the Corporation
shall be entitled to have a certificate signed in the name of the Corporation by
the Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by such stockholder in the Corporation.
SECTION 2. SIGNATURES. Any or all of the signatures on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. Except as provided in this Section 3, no new
certificate for shares shall be issued in lieu of an old one unless the latter
is surrendered and cancelled at the same time. The Corporation may issue a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation, alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. The Board of Directors may in its discretion require a bond
in such form and amount and with such surety as it may determine, before issuing
a new certificate.
SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable in the
manner prescribed by law and in these Bylaws or in any agreement with the
stockholder making the transfer. Transfers of stock shall be made on the books
of the Corporation only by the person named in the certificate or by his
attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be canceled before a new certificate shall be
issued.
SECTION 5. RECORD HOLDERS. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the record holder of
shares to receive dividends, and to vote as such record holder, and to hold
liable for calls and assessments a person registered on its books as the record
holder of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares
B-9
<PAGE> 39
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise required by law.
SECTION 6. TRANSFER AGENT. The Board of Directors may at its discretion
appoint one or more transfer agents, registrars and agents for making payment
upon any class of stock, bond, debenture or other security of the Corporation.
Such agents shall be located either within or outside of Delaware. They shall be
entitled to such compensation as may be agreed.
ARTICLE VI
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director or officer of another Corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a director
or officer or in any other capacity while serving as a director or officer,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director or officer and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; provided, however, that,
except as provided in Section 2 of this Article VI with respect to proceedings
to enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the Board
of Directors of the Corporation. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition (hereinafter an "advancement of expenses"); provided,
however, that, if the Delaware General Corporation Law requires, an advancement
of expenses incurred by an indemnitee in his capacity as a director or officer
(and not in any other capacity in which service was or is rendered by such
indemnitee, including without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be indemnified
for such expenses under this Article VI or otherwise (hereinafter an
"undertaking").
SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 1 of
this Article VI is not paid in full by the Corporation within forty-five (45)
days after a written claim has been received by the Corporation, the indemnitee
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If successful in whole or part in any such suit or
in a suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the indemnitee shall be entitled to be
paid also the expense of prosecuting or defending such suit. In (i) any suit
brought by the indemnitee to enforce a right to indemnification hereunder (but
not in a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) any suit by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met the applicable standard of conduct set forth in
the Delaware General Corporation Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the
B-10
<PAGE> 40
circumstances because the indemnitee has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right hereunder, or by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified or to such advancement of expenses
under this Article VI or otherwise shall be on the Corporation.
SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The rights of indemnification and to
the advancement of expenses conferred in this Article VI shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote
of stockholders or disinterested directors or otherwise.
SECTION 4. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another Corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law. In the event that
any insurance maintained by the Corporation does not provide full coverage,
either by the requirement of a deductible or co-payment or by the fact that the
expenses actually and reasonably incurred exceed the insurance limits or for any
other reason, the Corporation shall have the power to indemnify that agent or
person for the amount not covered by the insurance; provided, however, that the
Corporation shall have the power to indemnify the agent or person against such
liability notwithstanding any insurance and in accordance with the provisions of
this Article VI.
SECTION 5. INDEMNIFICATION OF EMPLOYEES OR AGENTS OF THE CORPORATION. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article VI with respect to the indemnification and
advancement of expenses of directors or officers of the Corporation.
SECTION 6. INDEMNIFICATION CONTRACTS. The Board of Directors is authorized
to enter into a contract with any director, officer, employee or agent of the
Corporation, or any person serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership, joint
venture, trust or other enterprise, including employee benefit plans, providing
for indemnification rights equivalent to or, if the Board of Directors so
determines, greater than, those provided for in this Article VI.
SECTION 7. EFFECT OF TERMINATION OF ACTION. The termination of any action,
suit or proceeding by judgment, order, settlement, or conviction or upon a plea
of nolo contendere or its equivalent shall not of itself create a presumption
that the person seeking indemnification did not act in good faith and in the
best interests of the Corporation and, with respect to any criminal action or
proceeding, had a reasonable cause to believe that his conduct was unlawful.
Entry of a judgment by a consent as part of a settlement shall not be deemed a
final adjudication of liability for negligence or misconduct in the performance
of duty, nor of any other issue or matter.
SECTION 8. EFFECT OF AMENDMENT. Any amendment, repeal or modification of
any provision of this Article VI by the stockholders or the directors of the
Corporation shall not adversely affect any right or protection of a director or
officer of the Corporation existing at the time of such amendment, repeal or
modification.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Subject to limitations contained in the General
Corporation Law of the State of Delaware and the Certificate of Incorporation,
the Board of Directors may declare and pay dividends upon the
B-11
<PAGE> 41
shares of capital stock of the Corporation, which dividends may be paid either
in cash, securities of the Corporation or other property.
SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
SECTION 4. CORPORATE SEAL. The Corporation shall have a corporate seal in
such form as shall be prescribed by the Board of Directors.
SECTION 5. VOTING OF STOCK OWNED BY THE CORPORATION. The Chairman of the
Board, the Chief Executive Officer (if either such officers have been appointed)
the President and any other officer of the Corporation authorized by the Board
of Directors shall have power, on behalf of the Corporation, to attend, vote and
grant proxies to be used at any meeting of stockholders of any Corporation
(except this Corporation) in which the Corporation may hold stock.
SECTION 6. CONSTRUCTION AND DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction and definitions in the
General Corporation Law of the State of Delaware shall govern the construction
of these Bylaws.
SECTION 7. LOANS TO OFFICERS AND EMPLOYEES. The Corporation may lend money
to, guarantee any obligation of or otherwise assist any officer or other
employee of the Corporation or of any of its subsidiaries, including any officer
or employee who is director of the Corporation or any of its subsidiaries,
whenever, in the judgment of the Board of Directors, such loan, guaranty or
assistance may reasonably be expected to benefit the Corporation. The loan,
guaranty or other assistance may be with or without interest and may be
unsecured or secured in such manner as the Board of Directors shall approve,
including, without limitation, a pledge of shares of stock of the Corporation.
SECTION 8. AMENDMENTS. Subject to the General Corporation Law of the State
of Delaware, the Certificate of Incorporation and these Bylaws, the Board of
Directors may by the affirmative vote of a majority of the entire Board of
Directors alter, amend, change, add to or repeal these Bylaws, or adopt other
Bylaws as in their judgment may be advisable for the regulation of the conduct
of the affairs of the Corporation. These Bylaws may also be altered, changed,
added to, amended or repealed by the affirmative vote of not less than sixty-six
and two-thirds percent (66 2/3%) percent of outstanding voting shares of the
Corporation entitled to vote on such matters, voting as a single class.
B-12
<PAGE> 42
EXHIBIT C
FORM OF MERGER AGREEMENT
AGREEMENT AND PLAN OF MERGER
OF
FOOTHILL INDEPENDENT BANCORP, A DELAWARE CORPORATION,
AND
FOOTHILL INDEPENDENT BANCORP, A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER, dated as of , 2000
("Merger Agreement") is entered into by and between Foothill Independent
Bancorp, a California corporation ("Foothill California"), and Foothill
Independent Bancorp, a Delaware corporation ("Foothill Delaware"), which
corporations are sometimes referred to herein as the "Constituent Corporations."
RECITALS
A. Foothill California is a corporation duly organized and existing under
the laws of the State of California and has authorized capital of 12,500,000
shares of Common Stock, no par value (the "Foothill California Common Stock").
As of , 2000, [5,762,656] shares of Foothill California Common
Stock were issued and outstanding.
B. Foothill Delaware is a corporation duly organized and existing under the
laws of the State of Delaware and has authorized capital of 25,000,000 shares of
Common Stock, par value $.001 per share (the "Foothill Delaware Common Stock"),
and 10,000,000 shares of Preferred Stock, par value $.001 per share. As of the
date hereof, 100 shares of Foothill Delaware Common Stock were issued and
outstanding, all of which were held by Foothill California. No shares of
Preferred Stock were issued and outstanding.
C. The Board of Directors of Foothill California has determined that it is
advisable and in the best interests of Foothill California and its shareholders
that Foothill California merge with and into Foothill Delaware upon the terms
and subject to the conditions of this Merger Agreement for the purpose of
effecting the reincorporation of Foothill California in the State of Delaware.
D. The respective Boards of Directors of Foothill California and Foothill
Delaware have adopted and approved the terms and conditions of this Merger
Agreement.
E. The parties intend by this Merger Agreement to effect a reorganization
under Section 368 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements contained herein, the parties hereto agree, subject to the terms
and conditions set forth herein, as follows:
I.
MERGER
1.1 Merger. In accordance with the provisions of this Merger Agreement,
the California General Corporation Law and the Delaware General Corporation Law,
Foothill California shall be merged with and into Foothill Delaware (the
"Merger"), the separate existence of Foothill California shall cease and
Foothill Delaware shall be, and is herein sometimes referred to as, the
"Surviving Corporation," and the name of the Surviving Corporation shall be
"Foothill Independent Bancorp."
1.2 Filing and Effectiveness. The Merger shall become effective when the
following actions have been completed:
(a) All of the conditions precedent to the consummation of the Merger
specified in this Merger Agreement and required under the California
General Corporation Law and the Delaware General Corporation Law have been
satisfied or duly waived by the party entitled to satisfaction thereof,
which
C-1
<PAGE> 43
conditions shall include, without limitation, obtaining all necessary
regulatory approvals, including, without limitation, the approval (or
waiver of approval requirements) from the Board of Governors of the Federal
Reserve System and the California Commissioner of Financial Institutions;
(b) An executed Certificate of Merger or an executed counterpart of
this Merger Agreement meeting the requirements of the California General
Corporation Law has been filed with the Secretary of State of the State of
California; and
(c) An executed Certificate of Merger or an executed counterpart of
this Merger Agreement meeting the requirements of the Delaware General
Corporation Law has been filed with the Secretary of State of the State of
Delaware.
The date and time when the Merger shall become effective is herein called
the "Effective Time of the Merger."
1.3 Effect of the Merger. At the Effective Time of the Merger, the
separate existence and corporate organization of Foothill California shall cease
and Foothill Delaware, as the Surviving Corporation, (i) shall continue to
possess all of its assets, rights, powers and property as constituted
immediately before the Effective Time of the Merger, (ii) shall be subject to
all actions previously taken by its and Foothill California's Board of
Directors, (iii) shall succeed, without other transfer, to all of the assets,
rights, powers and property of Foothill California in the manner more fully set
forth in Section 259(a) of the Delaware General Corporation Law, (iv) shall
continue to be subject to all of its debts, liabilities and obligations as
constituted immediately before the Effective Time of the Merger and (v) shall
succeed, without other transfer, to all of the debts, liabilities and
obligations of Foothill California in the same manner as if Foothill Delaware
had itself incurred them, all as more fully provided under the applicable
provisions of the Delaware General Corporation Law and the California General
Corporation Law.
II.
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation of
Foothill Delaware as in effect immediately before the Effective Time of the
Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended or repealed in
accordance with the provisions thereof and applicable law.
2.2 Bylaws. The Bylaws of Foothill Delaware as in effect immediately
before the Effective Time of the Merger shall continue in full force and effect
as the Bylaws of the Surviving Corporation until duly amended or repealed in
accordance with the provisions thereof and applicable law.
2.3 Officers and Directors. The persons who are officers and directors of
Foothill California immediately prior to the Effective Time of the Merger shall,
after the Effective Time of the Merger, be the officers and directors of the
Surviving Corporation, without change until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation, Bylaws and applicable law; provided, however, that directors of
Foothill Delaware shall, in accordance with the Bylaws of Foothill Delaware, be
elected to one of the three classes of directors established under the Foothill
Delaware Bylaws.
III.
MANNER OF CONVERSION OF STOCK
3.1 Foothill California Shares. Upon the Effective Time of the Merger,
each share of Foothill California Common Stock, no par value, issued and
outstanding immediately before the Effective Time of the Merger shall by virtue
of the Merger and without any action by the Constituent Corporations, by the
holder of such shares or by any other person, be converted into and become one
fully paid and nonassessable share of Common Stock, $.001 par value per share,
of the Surviving Corporation.
C-2
<PAGE> 44
3.2 Foothill California Stock Options and Stock Purchase Rights and
Employee Benefit Plans. At the Effective Time of the Merger, the Surviving
Corporation shall assume and continue all employee benefit plans and programs,
stock option and stock purchase plans and the dividend reinvestment plan of
Foothill California, and all options and rights to purchase or acquire shares of
Foothill California Common Stock, then in effect. At the Effective Time of the
Merger, each outstanding and unexercised option and right to purchase or acquire
shares of Foothill California Common Stock shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
become an option or right to purchase or acquire shares of the Surviving
Corporation's Common Stock on the basis of one share of the Surviving
Corporation's Common Stock for each share of Foothill California Common Stock
issuable pursuant to any such option or right, and under the same terms and
conditions and at an exercise or purchase price per share equal to the exercise
or purchase price per share applicable to any such Foothill California option or
right.
A number of shares of the Surviving Corporation's Common Stock shall be
reserved for issuance upon the exercise of options and other securities equal to
the number of shares of Foothill California Common Stock so reserved immediately
before the Effective Time of the Merger.
3.3 Foothill Delaware Common Stock. Upon the Effective Time of the Merger,
each share of Foothill Delaware Common Stock, $.001 par value per share, issued
and outstanding immediately before the Effective Time of the Merger shall, by
virtue of the Merger and without any action by Foothill Delaware, by the holder
of such shares or by any other person, be canceled and returned to the status of
authorized but unissued shares.
3.4 Exchange of Certificates. After the Effective Time of the Merger, each
holder of an outstanding certificate representing shares of Foothill California
Common Stock may, at such shareholder's option, surrender the same for
cancellation to ChaseMellon Shareholder Services, Inc., as transfer agent (the
"Transfer Agent"), and each such holder shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of shares of the
Surviving Corporation's Common Stock into which the surrendered shares were
converted as herein provided. Until so surrendered, each outstanding certificate
theretofore representing shares of Foothill California Common Stock shall be
deemed for all purposes to represent the number of whole shares of the Surviving
Corporation's Common Stock into which the shares of Foothill California Common
Stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation
or the Transfer Agent of any such outstanding certificate shall, until such
certificate has been surrendered for transfer or conversion or otherwise
accounted for to the Surviving Corporation or the Transfer Agent, have and be
entitled to exercise any voting or other rights with respect to and to receive
dividends and other distributions upon the shares of Common Stock of the
Surviving Corporation represented by such outstanding certificate as provided
above.
Each certificate representing Common Stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to
restrictions on transferability as the certificates of Foothill California so
converted and given in exchange therefor, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws.
IV.
GENERAL
5.1 Covenants of Foothill Delaware. Foothill Delaware covenants and agrees
that it will, on or before the Effective Time of the Merger:
(a) Qualify to do business as a foreign corporation in the State of
California and, in connection therewith, appoint an agent for service of
process as required under the provisions of Section 2105 of the California
General Corporation Law.
(b) Take such other actions as may be required by the California
General Corporation Law in or to effectuate the Merger.
C-3
<PAGE> 45
5.2 Further Assurances. From time to time, as and when required by
Foothill Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of Foothill California such deeds and other instruments, and
there shall be taken or caused to be taken by it such further and other actions
as shall be appropriate or necessary in order to vest or perfect in or conform
of record or otherwise by Foothill Delaware the title to and possession of all
the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of Foothill California and otherwise to carry out the
purposes of this Merger Agreement, and the officers and directors of Foothill
Delaware are fully authorized in the name and on behalf of Foothill California
or otherwise to take all such actions and to execute and deliver all such deeds
and other instruments.
5.3 Deferral. Consummation of the Merger may be deferred by the Board of
Directors of Foothill California for a reasonable period of time if the Board of
Directors determines that deferral would be in the best interests of Foothill
California and its shareholders.
5.4 Amendment. The parties hereto, by mutual consent of their respective
Boards of Directors, may amend, modify or supplement this Merger Agreement in
such manner as may be agreed upon by them in writing at any time before or after
approval of this Merger Agreement by the shareholders of Foothill California and
Foothill Delaware, but not later than the Effective Time of the Merger;
provided, however, that no such amendment, modification or supplement not
approved by the shareholders of Foothill California and Foothill Delaware shall
adversely affect the rights of such shareholders or change any of the principal
terms of this Merger Agreement.
5.5 Abandonment. At any time before the Effective Time of the Merger, this
Merger Agreement may be terminated and the Merger may be abandoned for any
reason whatsoever by the Board of Directors of either Foothill California or of
Foothill Delaware, or of both, notwithstanding the approval of this Merger
Agreement by the shareholders of Foothill California or Foothill Delaware, or by
both, if circumstances arise which make the Merger inadvisable. In the event of
abandonment of this Merger Agreement, as above provided, this Merger Agreement
shall become wholly void and of no effect, and no liability on the part of the
Board of Directors or shareholders of Foothill California or Foothill Delaware
shall arise by virtue of such termination.
5.6 Expenses. If the Merger becomes effective, the Surviving Corporation
shall assume and pay all expenses in connection therewith not theretofore paid
by the respective parties. If for any reason the Merger shall not become
effective, Foothill California shall pay all expenses incurred in connection
with all the proceedings taken in respect of this Merger Agreement or relating
thereto.
5.7 Registered Office. The registered office of the Surviving Corporation
in the State of Delaware is located at 1013 Centre Road, Wilmington, Delaware
19805, and Corporation Service Company is the registered agent of the Surviving
Corporation at such address.
5.8 Agreement. An executed copy of this Merger Agreement will be on file
at the principal place of business of the Surviving Corporation at 510 South
Grand Ave., Glendora, California 91741, and, upon request and without cost, a
copy thereof will be furnished to any shareholder.
5.9 Governing Law. This Merger Agreement shall in all respects be
construed, interpreted and enforced in accordance with and governed by the laws
of the State of Delaware and, so far as applicable, the Merger provisions of the
California General Corporation Law.
5.10 Counterparts. This Merger Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
C-4
<PAGE> 46
IN WITNESS WHEREOF, Foothill California and Foothill Delaware have caused
this Merger Agreement to be signed by their respective duly authorized officers.
FOOTHILL INDEPENDENT BANCORP,
a California corporation
--------------------------------------
George E. Langley, President and Chief
Executive Officer
ATTEST:
- ---------------------------------------------------
Tom Kramer, Secretary
FOOTHILL INDEPENDENT BANCORP,
a Delaware corporation
--------------------------------------
George E. Langley, President and Chief
Executive Officer
ATTEST:
- ---------------------------------------------------
Tom Kramer, Secretary
C-5
<PAGE> 47
EXHIBIT D
FORM OF FOOTHILL-DELAWARE OFFICER AND DIRECTOR
INDEMNIFICATION AGREEMENT
FOOTHILL INDEPENDENT BANCORP
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is made as of ,
, between FOOTHILL INDEPENDENT BANCORP, a Delaware corporation
(the "Company"), and ("Indemnitee"), an officer and/or member of
the Board of Directors of the Company.
WHEREAS, the Company desires the benefits of having Indemnitee serve as an
officer and/or director secure in the knowledge that expenses, liability and
losses incurred by him in his good faith service to the Company will be borne by
the Company or its successors and assigns in accordance with applicable law; and
WHEREAS, the Company desires that Indemnitee resist and defend against what
Indemnitee may consider to be unjustified investigations, claims, actions, suits
and proceedings which have arisen or may arise in the future as a result of
Indemnitee's service to the Company notwithstanding that conditions in the
insurance markets may make directors' and officers' liability insurance coverage
unavailable or available only at premium levels which the Company may deem
inappropriate to pay; and
WHEREAS, the parties believe it appropriate to memorialize and reaffirm the
Company's indemnification obligations to Indemnitee and, in addition, set forth
the indemnification agreements contained herein;
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the parties agree as follows:
1. Indemnification. Indemnitee shall be indemnified and held harmless by
the Company to the fullest extent permitted by its Certificate of Incorporation,
Bylaws and applicable law, as the same exists or may hereafter be amended,
against all expenses, liability and loss (including attorneys' fees, judgments,
fines, and amounts paid or to be paid in any settlement approved in advance by
the Company, such approval not to be unreasonably withheld) (collectively,
"Indefinable Expenses") actually reasonably incurred or suffered by Indemnitee
in connection with any present or future threatened, pending or contemplated
investigation, claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative (collectively, "Indemnifiable Litigation"), (i)
to which Indemnitee is or was a party or is threatened to be made a party by
reason of any action or inaction in Indemnitee's capacity as a director or
officer of the Company, or (ii) with respect to which Indemnitee is otherwise
involved by reason of the fact that Indemnitee is or was serving as a director,
officer, employee or agent of the Company, or of any subsidiary or division, or
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise. Notwithstanding the foregoing, Indemnitee shall have no right to
indemnification for expenses and the payment of profits arising from the
purchase and sale by Indemnitee of securities in violation of Section 16(b) of
the Securities and Exchange Act of 1934, as amended.
2. Interim Expenses. The Company agrees to pay Indemnifiable Expenses
incurred by Indemnitee in connection with any Indemnifiable Litigation in
advance of the final disposition thereof, provided that the Company has received
an undertaking by or on behalf of Indemnitee, substantially in the form attached
hereto as Exhibit A, to repay the amount so advanced to the extent that it is
ultimately determined that Indemnitee is not entitled to be indemnified by the
Company under this Agreement or otherwise.
3. Trust Fund.
(a) The Company may, but is not obligated to, establish a trust (the
"Trust") to fund certain of its obligations under this Agreement and
similar agreements with other directors and/or officers (collectively,
including Indemnitee, the "Beneficiaries"). Therefore, in such event, in
addition to Indemnitee's rights under this Indemnification Agreement and
any applicable insurance policy, Indemnitee shall also have the right to
seek indemnification payments from the trustee (the "Trustee") of any such
trust that may be established hereafter in accordance with the terms of
this Agreement and of the trust agreement.
D-1
<PAGE> 48
(b) All communications or demands made by and among the Trustee and
the Beneficiaries of any such Trust are to be made through the individual
designated as the Beneficiaries' Representative. As of the date of this
Agreement, a Trust has not been established, nor has a Beneficiaries'
Representative been designated. The Beneficiaries' Representative shall be
designated and may be changed from time to time and at any time upon
agreement of two-thirds of the Beneficiaries at such time.
4. Procedure for Making Demand. In order to receive his rights to be
indemnified under this Agreement, including rights to receive advance payments
as set forth in Paragraph 2, Indemnitee shall make demand upon the Company to
honor its indemnity obligations and pay the Indemnifiable Expenses. If the
Company fails to do so within fifteen (15) days, the Indemnitee shall then have
the right and obligation to make demand under any applicable policy of
directors' and officers' liability insurance then in effect upon the insurance
company (the "Insurance Company") issuing such policy. If Insurance Company
fails to pay the demand within fifteen (15) days, then, if a Trust shall have
been established, the Indemnitee, through the Beneficiaries' Representative,
shall then be entitled and obligated to make demand upon the Trustee of the
Trust for such payment. Indemnitee shall not be required to institute a lawsuit
or take other actions against the Company, Insurance Company or any insurer to
recover the unpaid amount prior to the Beneficiaries' Representative making a
demand and receiving payment from the Trustee on his behalf, but the
Beneficiaries' Representative shall deliver a certificate to the Trustee at the
time of payment of each distribution from the Trust certifying that no part of
such payment has been previously received from the Company or any insurer.
5. Failure to Indemnify.
(a) If a claim under this Agreement, or any statute, or under any
provision of the Company's Certificate of Incorporation or Bylaws providing
for indemnification, is not paid in full by the Company, Insurance Company
or, if the Trust Fund shall have been established, by the Trustee, within
forty-five (45) days after a written request for payment thereof has been
received by the Company, Indemnitee may, but need not, at any time
thereafter bring an action against the Company to recover the unpaid amount
of the claim and, if successful in whole or in part, Indemnitee shall also
be entitled to be paid for the expense (including attorneys' fees) of
bringing such action.
(b) It shall be a defense to such action (other than an action brought
to enforce a claim pursuant to Section 2 hereof for expenses incurred in
connection with any action, suit or proceeding in advance of its final
disposition) that Indemnitee has not met the standard of conduct which
makes it permissible under applicable law for the Company to indemnify
Indemnitee for the amount claimed, but the burden of proving such defense
shall be on the Company and Indemnitee shall be entitled to receive interim
payments of interim expenses pursuant to Section 2 hereof unless and until
such defense may be finally adjudicated by court order or judgment from
which no further right of appeal exists. It is the parties' intention that
if the Company contests Indemnitee's right to indemnification, the question
of Indemnitee's right to indemnification shall be for the court to decide,
and neither the failure of the Company (including its board of directors,
independent legal counsel, or its stockholders) to have made a
determination that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct
required by applicable law, nor an actual determination by the Company
(including its board of directors, any committee or subgroup of the board
of directors, independent legal counsel, or its stockholders) that
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that Indemnitee has or has not met the applicable standard of
conduct.
6. Notice to Insurers. If, at the time of the receipt of a notice of a
claim pursuant to Section 4 thereof, the Company has director and/or officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
D-2
<PAGE> 49
7. Retention of Counsel.
(a) Whether Indemnitee is seeking payment of Indemnifiable Expenses
directly from the Company or from the Trustee of a Trust, the Indemnitee
or, if the Trust Fund shall have been established, then the Beneficiaries'
Representative, shall have the right and obligation on behalf of Indemnitee
and other Beneficiaries, in the case of the Beneficiaries' Representative,
to (i) seek counsel to represent Indemnitee with respect to any matter
subject to indemnification and payment hereunder; (ii) coordinate the
defense of any such matter; and (iii) approve the fees and other expenses
of such counsel.
(b) Notwithstanding the foregoing, Indemnitee may retain different
counsel than the other Indemnitees or Beneficiaries, or may incur expenses
not shared in common with the other Indemnitees or Beneficiaries, in
connection with any Indemnifiable Litigation if in the reasonable judgment
of Indemnitee there may be legal defenses available to him which are
different from or additional to those available to the other Indemnitees or
Beneficiaries and, as a consequence, an actual or potential conflict of
interest with the other Indemnitees or Beneficiaries exists. If the Trust
Fund shall have been established, Indemnitee must obtain the prior written
approval of the Beneficiaries' Representative to retain such counsel, which
consent shall not be unreasonably withheld. In the event that the
Beneficiaries' Representative withholds such consent, Indemnitee shall then
have the right to seek approval for such separate counsel from the Trustee,
which approval shall not be unreasonably withheld. Nothing contained herein
shall prohibit Indemnitee from retaining other counsel at Indemnitee's own
expense.
8. Successors. This Agreement establishes contract rights which shall be
binding upon, and shall inure to the benefit of, the successors, assigns, heirs
and legal representatives of the parties hereto.
9. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that
in certain instances, Federal law or applicable public policy may prohibit the
Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company may be
required in the future to undertake to the Securities and Exchange Commission to
submit the question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee, and, in that event, the Indemnitee's rights and the Company's
obligations hereunder shall be subject to that determination.
10. Contract Rights Not Exclusive. The contract rights conferred by this
Agreement shall be in addition to, but not exclusive of, any other right which
Indemnitee may have or may hereafter acquire under any statute, provision of the
Company's Certificate of Incorporation or Bylaws, agreement, vote of
shareholders or disinterested directors, or otherwise.
11. Indemnitee's Obligations. The Indemnitee shall promptly advise the
Company in writing of the institution of any investigation, claim, action, suit
or proceeding which is or may be subject to this Agreement and keep the Company
generally informed of, and consult with the Company with respect to, the status
of any such investigation, claim, action, suit or proceeding. Notices to the
Company shall be directed to Collectors Universe, Inc., 1936 E. Deere Street,
Suite 100 Santa Ana, CA 92705, Attn: President (or other such address as the
Company shall designate in writing to Indemnitee). Notice shall be deemed
received three days after the date postmarked if sent by certified or registered
mail, properly addressed. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
12. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, a court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement, or to enforce
or interpret any other terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims
D-3
<PAGE> 50
and cross-claims made in such action), unless as a part of such action the court
determines that each of Indemnitee's material defenses to such action were made
in bad faith or were frivolous.
13. Severability. Should any provision of this Agreement, or any clause
thereof, be held to be invalid, illegal or unenforceable, in whole or in part,
the remaining provisions and clauses of this Agreement shall remain fully
enforceable and binding on the parties.
14. Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether of
not similar) nor shall such waiver constitute a continuing waiver.
15. Choice of Law. The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Delaware.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
<TABLE>
<S> <C>
INDEMNITEE FOOTHILL INDEPENDENT BANCORP
By:
- ----------------------------------------------------- -------------------------------------------------
Name: Name:
Title:
</TABLE>
D-4
<PAGE> 51
EXHIBIT A
UNDERTAKING AGREEMENT
This AGREEMENT is made as of , , between FOOTHILL
INDEPENDENT BANCORP, a Delaware corporation (the "Company") and ,
a member of the board of directors and/or an officer of the Company
("Indemnitee").
WHEREAS, Indemnitee may become involved in investigations, claims, actions,
suits or proceedings which have arisen or may arise in the future as a result of
Indemnitee's service to the Company; and
WHEREAS, Indemnitee desires that the Company pay any and all expenses
(including, but not limited to, attorneys' fees and court costs) actually and
reasonably incurred by Indemnitee or on Indemnitee's behalf in defending or
investigating any such suits or claims and that such payment be made in advance
of the final disposition of such investigations, claims, actions, suits or
proceedings to the extent that Indemnitee has not been previously reimbursed by
insurance; and
WHEREAS, the Company is willing to make such payments but, in accordance
with the Bylaws of the Company and Section 145 of the General Corporation Law of
the State of Delaware, the Company may make such payments only if it receives an
undertaking to repay from Indemnitee; and
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. In regard to any payments made by the Company to Indemnitee pursuant to
the terms of the Indemnification Agreement dated as of , ,
between the Company and Indemnitee, Indemnitee hereby undertakes and agrees to
repay to the Company any and all amounts so paid promptly and in any event
within thirty (30) days after the disposition, including any appeals, of any
litigation or threatened litigation on account of which payments were made, but
only to the extent that Indemnitee is ultimately found not to be entitled to be
indemnified by the Company under the Bylaws of the Company and Section 145 of
the General Corporation Law of the State of Delaware, or other applicable law.
2. This Agreement shall not affect in any manner rights which Indemnitee
may have against the Company, any insurer or any other person to seek
indemnification for or reimbursement of any expenses referred to herein or any
judgment which may be rendered in any litigation or proceeding.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first above written.
<TABLE>
<S> <C>
INDEMNITEE FOOTHILL INDEPENDENT BANCORP
By:
- ----------------------------------------------------- -------------------------------------------------
Name: Name
Title:
</TABLE>
<PAGE> 52
PRELIMINARY COPY
PROXY
FOOTHILL INDEPENDENT BANCORP
PROXY SOLICITED BY THE BOARD OF DIRECTORS
SPECIAL MEETING OF THE SHAREHOLDERS
________ __, 2000
The undersigned hereby nominates, constitutes and appoints William V.
Landecena, O.L. Mestad, George Langley and Donna Miltenberger, and each of them
individually, the attorney, agent and proxy of the undersigned, with full power
of substitution, to vote all stock of FOOTHILL INDEPENDENT BANCORP which the
undersigned is entitled to represent and vote at the Special Meeting of
Shareholders of the Company to be held at the corporate offices of Foothill
Independent Bank, located at 510 South Grand Avenue, Glendora, California, on
________ ___, 2000, at 10:00 A.M., and at any and all adjournments thereof, as
fully as if the undersigned were present and voting at the Special Meeting, as
follows:
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND RETURN THIS PROXY, WHICH MAY BE REVOKED AT
ANY TIME PRIOR TO ITS USE.
IMPORTANT - PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
1. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
OR
2. Call TOLL FREE 1-800-840-1208 on a Touch Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
OR
3. TO Vote by Internet at our Internet Address: http://___proxyvoting.com
PLEASE VOTE
<PAGE> 53
Please
mark
your
votes
/X/
as this.
THE DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1, PROPOSAL 2, PROPOSAL 3 AND
PROPOSAL 4
1. PROPOSAL 1 A CHANGE IN THE STATE OF INCORPORATION OF THE COMPANY FROM
CALIFORNIA TO DELAWARE
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. PROPOSAL 2 THE ELIMINATION OF CUMULATIVE VOTING IN THE ELECTION OF
DIRECTORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL 3 AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM
12,500,000 TO 25,000,000
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL 4 AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
TO CREATE A NEW CLASS OF SHARES OF PREFERRED STOCK COMPRISED OF
10,000,000 SHARES THAT THE BOARD OF DIRECTORS COULD ISSUE WITHOUT
FURTHER SHAREHOLDER ACTION
[ ] FOR [ ] AGAINST [ ] ABSTAIN
I will attend the Special Meeting [ ]
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER ON THIS PROXY. WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL BE
VOTED FOR THE PROPOSALS DESCRIBED ABOVE IN THIS PROXY.
Signature(s)
Date , 2000
--------------------------------
Please sign your name exactly as it appears hereon. Executors, administrators,
guardians, officers of corporations, and others signing in a fiduciary capacity
should state their full titles as such.
- FOLD AND DETACH HERE -
VOTE BY TELEPHONE OR INTERNET
QUICK *** EASY *** IMMEDIATE
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF THREE WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch tone telephone
24 hours a day - 7 days a week.
There is NO CHARGE to you for this call. - Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in
the lower right hand corner of this form.
OPTION 1: To vote as the Board of Directors recommends on ALL proposals,
press 1.
When asked, please confirm by Pressing 1.
OPTION 2: If you choose to vote on each proposal separately, press 0. You will
hear these instructions:
Proposal 1 - To vote FOR ALL Nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9.
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.
Proposal 2 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
The instructions are the same for all remaining proposals.
OR
2. VOTE BY INTERNET: Follow the instructions at our Website Address:
http://www.eproxy.com/_____
OR
3. VOTE BY PROXY CARD: Mark, sign and date your proxy card and return
promptly in the enclosed envelope.
NOTE: If you vote by Internet or telephone, THERE IS NO NEED TO MAIL BACK your
Proxy Card.
THANK YOU FOR VOTING.
