<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[ ] Preliminary Proxy Statement [ ] Confidential. For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FP BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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
FP BANCORP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 27, 1997
The annual meeting of stockholders (the "Meeting") of FP Bancorp, Inc., a
Delaware corporation (the "Company"), will be held at the California Center for
the Arts, Escondido, located at 340 North Escondido Blvd., Escondido,
California at 5:30 p.m. local time on May 27, 1997 for the following purposes:
1. To elect seven persons as directors of the Company, each with a
two-year term;
2. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditor for 1997; and
3. To transact such other business as may properly come before the
Meeting and any adjournment or adjournments thereof.
The Board of Directors has fixed March 31, 1997 as the record date for
determining the stockholders entitled to receive notice of and to vote at the
Meeting.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, SIGN, AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By order of the Board of Directors,
___________________________________
GARY W. DEEMS, Secretary
April 16, 1997
Escondido, California
<PAGE> 3
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OF
FP BANCORP, INC.
TO BE HELD ON MAY 27, 1997
INTRODUCTION
GENERAL
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors (the "Board") for use at the Annual
Meeting of Stockholders (the "Meeting") of FP Bancorp, Inc., a Delaware
corporation (the "Company"), to be held at the California Center for the Arts,
Escondido at 5:30 p.m. on May 27, 1997 and at any adjournment or adjournments
thereof. This Proxy Statement is expected to be mailed to stockholders on or
about April 16, 1997.
The matters to be considered and voted upon at the Meeting are:
1. The election of seven persons to serve as directors of the
Company, each with a two-year term;
2. A proposal to ratify the appointment of KPMG Peat Marwick LLP
as the Company's independent auditor for 1997; and
3. Such other business as may properly come before the Meeting
and any adjournment or adjournments thereof.
If the enclosed form of proxy is executed and returned, it may,
nevertheless, be revoked at any time before it is exercised by (i) filing with
the Secretary of the Company an instrument revoking it or a duly executed proxy
bearing a later date or (ii) voting in person at the Meeting. Subject to such
revocation, all shares represented by a properly executed proxy received in
time for the Meeting will be voted by the holders thereof in accordance with
the instructions on the proxy. If no instruction is specified with respect to
a matter to be acted upon, the shares represented by the proxy will be voted in
favor of the nominees of management for directors of the Company, for the
ratification of KPMG Peat Marwick LLP as the independent auditor for 1997 and,
as to other matters, if any, in accordance with the recommendations of the
Board.
VOTING SECURITIES; CUMULATIVE VOTING
The number of shares of the Company's common stock, par value $.001
("Common Stock"), outstanding and entitled to vote at the Meeting is 2,653,638.
Only those stockholders of record at the close of business on March 31, 1997
(the "Record Date") will be entitled to notice of and to vote at the Meeting or
any adjournment thereof. Each holder of Common Stock is entitled to one vote
for each share in that holder's name on the books of the Company as of the
Record Date on any matter submitted to the vote of the stockholders, except
that, in the election of directors, the shares may be voted cumulatively.
Cumulative voting enables a stockholder to give one nominee for director a
number of votes equal to the number of directors to be elected multiplied by
the number of shares being voted by such stockholder or to distribute his or
her votes on the same principle among two or more nominees as he or she sees
fit. The proxy holders are given, under the terms of proxy, discretionary
authority to cumulate votes represented by shares for which they are named
proxy.
<PAGE> 4
PROPOSAL I
ELECTION OF DIRECTORS
STAGGERED TERMS
The Board is currently composed of 14 directors. The size of the
Board was increased from 12 to 14 in September, 1996 and the two vacancies
created by that expansion were filled by Michael J. Perdue and Gary W. Deems.
Under the By-Laws of the Company, the terms of directors are for two years and
one-half of the Board is elected each year.
At the Meeting, seven directors will be elected. All of the currently
serving directors whose terms expire at the Meeting will be nominated for
election to serve until the 1999 annual meeting and until their successors are
duly elected and qualified. The nominees are:
Harvey L. Williamson
Michael J. Perdue
Earle W. Frey, Jr.
Robert W. Klemme
Randall C. Luce
Robert M. Spanjian
Michael W. Wexler
Votes will be cast by the proxies in such a way as to effect the
election of all seven nominees, or as many thereof as possible under the rules
of cumulative voting. In the event that any of the nominees should be unable
to serve as a director, it is intended that the proxies be voted for the
election of substitute nominees, if any, designated by the Board. Management
has no reason to believe that any of the nominees will be unable to serve. The
following table presents certain information concerning each of the currently
serving directors, including the nominees.
DIRECTORS AND NOMINEES
<TABLE>
<CAPTION>
CURRENT
POSITIONS HELD DIRECTOR OF THE TERM
NAME AGE WITH THE COMPANY COMPANY SINCE EXPIRES
---- --- ---------------- ------------- -------
<S> <C> <C> <C> <C>
Harvey L. Williamson 63 President, Chief 1988 1997
Executive Officer and
Director
Michael J. Perdue(1) 43 Executive Vice President, 1996 1997
Chief Operating Officer
and Director
Gary W. Deems 50 Executive Vice President, 1996 1998
Chief Administrative
Officer, Secretary and
Director
Mark N. Baker 50 Chairman and Director 1984 1998
Earle W. Frey, Jr. 71 Director 1984 1997
Robert W. Klemme 51 Director 1995 1997
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
CURRENT
POSITIONS HELD DIRECTOR OF THE TERM
NAME AGE WITH THE COMPANY COMPANY SINCE EXPIRES
---- --- ---------------- ------------- -------
<S> <C> <C> <C> <C>
Joseph J. Kuebler 54 Director 1993 1998
Randall C. Luce 37 Director 1995 1997
Larry R. Markham 46 Director 1993 1998
Richard W. McBride 62 Director 1992 1998
Richard S. Spanjian 69 Director 1993 1998
Robert M. Spanjian 71 Director 1988 1997
Richard B. Thomas 50 Director 1995 1998
Michael W. Wexler 50 Director 1984 1997
</TABLE>
________________________
(1) Mr. Perdue also served as a director of the Company from August 1992
to August 1993.
Harvey L. Williamson became President and Chief Executive Officer of
the Company and its wholly-owned subsidiary, First Pacific National Bank
("FPNB"), on August 13, 1992. Prior to that time he served as a Senior
Executive Vice President of the Company beginning in 1990, was an Executive
Vice President of the Company from 1988 to 1990 and served as President and
Chief Executive Officer of San Marcos National Bank from 1983 until September
1992.
Michael J. Perdue has served as Executive Vice President and Chief
Operating Officer of the Company and FPNB since August 1993. He served as a
director of the Company from August 1992 to August 1993. He served as
President and Chief Executive Officer of Temecula Valley National Bank from
July 1992 until August 1993. Immediately prior to coming to Temecula Valley
National Bank, Mr. Perdue served as Vice President and Chief Financial Officer
of Ranpac, Inc., a real estate development company headquartered in Temecula,
California.
Gary W. Deems has served as Executive Vice President, Chief
Administrative Officer and Secretary of the Company and FPNB since July 1993.
From 1990 to 1993, Mr. Deems oversaw 18 retail branches as a Vice
President/District Manager for Wells Fargo Bank.
Mark N. Baker is a partner in Baker Enterprises, a real estate venture
partnership, and has held such position since 1972. Mr. Baker is also
Executive Vice President of San Diego Wood Preserving Co. and has held that
position since 1985. From 1982 through 1996, Mr. Baker also served as
Executive Vice President of Baker Electric, Inc., a local electrical contractor
in business in Escondido, California since 1937.
Earle W. Frey, Jr. is President of Frey Nursery, Inc. a nursery
containing primarily avocado and citrus trees. Mr. Frey has held such position
since 1975.
Robert W. Klemme is the President of Entrepreneurial Capital
Corporation, a diversified holding company, and has held such position since
1986. From 1993 until its acquisition by the Company in 1995 (the "Overland
Merger"), Mr. Klemme served as Chairman of Overland Bank. He served as a
director of Cal-West National Bank from 1986, and as Chairman of Cal-West
National Bank, from 1987 until its merger with Overland Bank in 1993 (the
"Cal-West Merger").
3
<PAGE> 6
Joseph J. Kuebler is President of Kuebler, Thomas & Co., Certified
Public Accountants, which has offices in Temecula and Perris, California. Mr.
Kuebler has held such position since 1987.
Randall C. Luce is President of Entrepreneurial Investment Corporation
("EIC"), a capital investment company specializing in the real estate and
financial service industries. EIC is part of the Entrepreneurial Corporate
Group, a diversified group of companies owned by Duane R. Roberts. Since 1987,
Mr. Luce has served in various senior management positions with affiliates of
Entrepreneurial Capital Group, including serving as President of EIC and
Entrepreneurial Management Corporation. From 1993 until the Overland Merger in
1995, Mr. Luce served as Vice Chairman of Overland Bank, and Mr. Luce served as
President and Chief Executive Officer of Cal-West National Bank from 1991 until
the Cal-West Merger in 1993.
Larry R. Markham is the principal of Markham & Associates, a
development consulting firm that has been in business in Temecula since 1981.
Richard W. McBride is President of Southern Contracting Co., a
regional electrical contractor that has been in business since 1964.
Richard S. Spanjian is a retired businessman. During the period from
1945 to 1985, Mr. Spanjian was President of Spanjian Sportswear, Inc. Richard
S. Spanjian is the brother of Robert M. Spanjian, who also is a director.
Robert M. Spanjian is a retired businessman. During the period from
1945 to 1985, Mr. Spanjian was Chairman and Vice President of Spanjian
Sportswear, Inc. Robert M. Spanjian is the brother of Richard S. Spanjian, who
also is a director.
Richard B. Thomas is the President of Richard B. Thomas, a
Professional Accountancy Corporation, and has held such position since 1996.
Prior to that, he served as Senior Vice President and Chief Financial Officer
of Entrepreneurial Capital Corporation, a diversified holding company, and had
held such positions since 1989. From 1993 until the Overland Merger in 1995,
Mr. Thomas was a director of Overland Bank. From 1990 until the Cal-West
Merger in 1993, he served as a director of Cal-West National Bank.
Michael W. Wexler is President of Pine Tree Lumber Company and has
held such position since 1977.
SECURITIES OWNERSHIP OF OFFICERS, DIRECTORS AND OTHERS
The Company is unaware of any stockholder who is a beneficial owner of
more than 5% of the issued and outstanding Common Stock (a "5% Owner") based
upon the Company's stockholder records as of the close of business on March 31,
1997, except for Duane R. Roberts and his affiliate, Entrepreneurial Investment
Corporation. The following table presents the security ownership as of March
31, 1997 of those persons who have served as the Company's officers and
directors at any time since January 1, 1996 or who are 5% Owners.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP OF COMMON
NAME STOCK(1)(2) PERCENTAGE OF CLASS (3)
- ---- -------------------------------- -------------------
<S> <C> <C>
Mark N. Baker 70,908 (4) 2.66%
Baker Enterprises
613 West Valley Parkway
Escondido, CA 92025
Gary W. Deems 74,075 (5) 2.76%
FP Bancorp, Inc.
613 West Valley Parkway
Escondido, CA 92025-4929
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP OF COMMON
NAME STOCK(1)(2) PERCENTAGE OF CLASS (3)
- ---- ------------------------------- --------------------
<S> <C> <C>
Earle W. Frey, Jr. 71,326 (6) 2.68%
Frey Nursery, Inc.
3420 Reed Road
Escondido, CA 92027
Robert W. Klemme 35,321 (7) 1.32%
Entrepreneurial Capital Corporation
3400 Central Avenue, #325
Riverside, CA 92506
Joseph J. Kuebler 25,856 (8) 0.97%
Kuebler, Thomas & Co.
43500 Ridge Park Drive, #104
Temecula, CA 92590
Randall C. Luce 22,529 (9) 0.84%
Entrepreneurial Investment Corporation
3400 Central Avenue, #325
Riverside, CA 92506
Larry R. Markham 12,016 (10) 0.45%
Markham & Associates
41750 Winchester Road, Suite N
Temecula, CA 92590
Richard W. McBride 56,732 (11) 2.13%
Southern Contracting Co.
599 North Twin Oaks Valley Road
San Marcos, CA 92060
Michael J. Perdue 62,214 (12) 2.31%
FP Bancorp, Inc.
613 West Valley Parkway
Escondido, CA 92025-4929
Duane R. Roberts 551,999 (13) 20.80%
Entrepreneurial Corporate Group
3400 Central Avenue, #325
Riverside, CA 92506
Richard S. Spanjian 43,500 (14) 1.63%
7315 El Fuerte Street
Carlsbad, CA 92009
Robert M. Spanjian 26,500 (15) 0.99%
Spanjian Enterprises
2111 Palomar Airport Road, Suite 210
Carlsbad, CA 92009
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP OF COMMON
NAME STOCK(1)(2) PERCENTAGE OF CLASS (3)
- ---- ------------------------------- -------------------
<S> <C> <C>
Richard B. Thomas 13,752 (16) 0.51%
Richard B. Thomas, a Professional
Accountancy Corporation
2681 Point Del Mar
Corona Del Mar, CA 92625
Michael W. Wexler 62,415 (17) 2.34%
Pine Tree Lumber Company, Inc.
707 North Andreasen
Escondido, CA 92029
Harvey L. Williamson 64,188 (18) 2.37%
FP Bancorp, Inc.
613 W. Valley Parkway
Escondido, CA 92025-4929
All executive officers and directors of
the Company as a group (14) persons 641,332 (19) 22.71%
</TABLE>
- --------------
(1) Unless otherwise indicated, each person listed has sole voting and
investment power with respect to the shares listed.
(2) Includes all shares beneficially owned, whether directly or indirectly,
individually or together with associates. Includes any shares owned,
whether jointly or as community property with a spouse, or any stock of
which beneficial ownership may be acquired within 60 days of March 31,
1997 by the exercise of stock options.
(3) Any securities not outstanding which are subject to options, warrants,
rights or conversion privileges which may be exercised within 60 days
shall be deemed to be outstanding for the purpose of computing the
percentage of outstanding securities of the class owned by such person
but shall not be deemed to be outstanding for the purpose of computing
the percentage of the class by any other person.
(4) Includes 21,414 shares held by Mark N. Baker as Trustee of the Trust
dated October 21, 1985; also includes 6,212 shares held by Mark N.
Baker as Custodian for the benefit of certain of his children under
the California Uniform Gift to Minors Act; also includes 104 shares
held by Margaret A. Baker as Custodian for the benefit of certain of
her nieces under the California Uniform Gift to Minors Act; also
includes 33,140 shares held by the Baker Electric Profit Sharing Plan
and the Tri-Baker, Inc. Profit Sharing Plan; also includes 1,657
shares held by Kent N. Baker, Mark N. Baker and Gerald N. Baker as
Trustees of the December 21, 1989 Baker Trust; also includes 770
shares held in the name of Wedbush Morgan Securities, Inc. for the
benefit of Mark N. Baker under an individual retirement account; also
includes 6,500 shares which may be acquired by the exercise of stock
options within 60 days after March 31, 1997.
(5) Includes 41,000 shares held by MLPF&S as Custodian for the benefit of
Gary W. Deems under an individual retirement account; also includes
2,841 shares held in the First Pacific National Bank 401(k) Savings
Plan; also includes 30,000 shares which may be acquired by the
exercise of stock options within 60 days after March 31, 1997.
(6) Includes 1,966 shares held by Earle W. Frey, Jr., as Trustee under a
Trust dated February 14, 1977; also includes 152 shares held by Earle
W. Frey, Jr., as Trustee under a Trust dated October 30, 1969; also
includes 62,427 shares held by Earle W. Frey, Jr., as Trustee under
the Frey Family Trust; also includes 6,500 shares which may be
acquired by the exercise of stock options within 60 days after March
31, 1997.
(7) Includes 6,500 shares which may be acquired by the exercise of stock
options within 60 days after March 31, 1997.
(8) Includes 1,887 shares held by MLPF&S as Custodian for the benefit of
Krista Kuebler; also includes 20 shares held by Joseph J. Kuebler as
Custodian for the benefit of Amber Adams-Kuebler; also includes 1,859
shares held by MLPF&S as Custodian for the benefit of Sharon Kuebler
under an individual retirement account; also includes 6,890 shares
held by MLPF&S as Custodian for the benefit of Joseph J. Kuebler
under an individual retirement account; also includes 700 shares held
by Wedbush Morgan Securities, Inc. as Custodian for the benefit of
Sharon Kuebler under an individual retirement account; also includes
5,000 shares held by Western Financial as Custodian for the benefit of
Joseph J. Kuebler under an individual retirement account; also
includes 1,500 shares owned by
6
<PAGE> 9
Kuebler Accounting Corporation; also includes 6,500 shares which may
be acquired by the exercise of stock options within 60 days after
March 31, 1997.
(9) Includes 6,500 shares which may be acquired by the exercise of stock
options within 60 days after March 31, 1997.
(10) Includes 5,499 shares held by Dean Witter Reynolds Custodian for the
benefit of Larry Markham under an individual retirement account
rollover; also includes 6,500 shares which may be acquired by the
exercise of stock options within 60 days after March 31, 1997.
(11) Includes 409 shares held by Darlene Y. McBride; also includes 47,700
shares held by Richard W. McBride as Trustee of the McBride Family
Trust; also includes 6,500 shares which may be acquired by the
exercise of stock options within 60 days after March 31, 1997.
(12) Includes 11,550 shares held by Michael J. Perdue, as Trustee of the
Perdue Family Trust; also includes 19,700 shares held by MLPF&S as
Custodian for the benefit of Michael J. Perdue under an individual
retirement account; also includes 28,000 shares which may be acquired
by the exercise of stock options within 60 days after March 31, 1997;
also includes 2,864 shares held in the First Pacific National Bank
401(k) Savings Plan.
(13) Includes 122,712 shares owned by Entrepreneurial Investment
Corporation.
(14) Includes 35,973 shares held by Richard S. Spanjian as Trustee of the
Richard S. Spanjian Family Trust; also includes 1,027 shares held by
Richard S. Spanjian as Trustee of the Elizabeth Spanjian Family Trust;
also includes 6,500 shares which may be acquired by the exercise of
stock options within 60 days after March 31, 1997.
(15) Includes 20,000 shares held by Robert M. Spanjian as Trustee of the
Robert M. Spanjian Family Trust; also includes 6,500 shares which may
be acquired by the exercise of stock options within 60 days after
March 31, 1997.
(16) Includes 500 shares held by Richard B. Thomas Pension Plan; also
includes 1,500 shares held by Richard B. Thomas as Custodian for the
benefit of Scott Thomas; also includes 6,500 shares which may be
acquired by the exercise of stock options within 60 days after March
31, 1997.
(17) Includes 17,729 shares held by Michael W. Wexler as Custodian for the
benefit of certain of his children under the California Uniform Gift
to Minors Act; also includes 6,500 shares which may be acquired by the
exercise of stock options within 60 days after March 31, 1997.
(18) Includes 10,017 shares held by Harvey L. Williamson as Trustee of the
Williamson Family Trust; also includes 3,144 shares held by Wedbush
Morgan Securities, Inc. as Custodian for the benefit of Tolly A.
Williamson under an individual retirement account; also includes 3,380
shares held by Wedbush Securities, Inc. as Custodian for the benefit
of Harvey L. Williamson under an individual retirement account; also
includes 4,112 shares held by Transcorp Pension Services as Custodian
for the benefit of Harvey L. Williamson under an individual retirement
account; also includes 40,000 shares which may be acquired by the
exercise of stock options within 60 days after March 31, 1997; also
includes 3,535 shares held in the First Pacific National Bank 401(k)
Savings Plan.
(19) Includes 169,500 shares which may be acquired by the exercise of stock
options within 60 days after March 31, 1997.
MEETINGS AND COMMITTEES
The Board of the Company met 12 times in 1996. No director attended
less than 75% of the aggregate of (i) the total number of meetings of the Board
and (ii) the total number of meetings held by all committees on which he served
in 1996.
The Company has an Audit Committee of the Board. The members of the
Audit Committee are Joseph J. Kuebler, Chairman, Mark N. Baker, Earle W. Frey,
Jr., Richard W. McBride and Richard B. Thomas. In 1996, the Audit Committee
met four times. This Committee verifies that standard auditing procedures are
being followed, recommends annually to the Board the engagement of an
independent auditing firm, reviews the scope and results of the audit with the
independent auditors and meets with the independent auditors as appropriate.
The Company has a Compensation Committee of the Board. The members of
the Compensation Committee are Randall C. Luce, Chairman, Mark N. Baker, Robert
W. Klemme, Richard W. McBride and Michael W. Wexler. In 1996, the Compensation
Committee met eight times. This committee reviews and recommends to the Board
the remuneration to be paid to the officers of the Company, reviews with the
President of FPNB his plans with respect to remuneration of officers and
employees of FPNB and reviews and prepares his recommendations to the Board
with respect to bonus, stock option, stock purchase, stock ownership and fringe
benefit plans, or changes to existing plans.
The Company does not have a nominating committee.
7
<PAGE> 10
DIRECTOR REMUNERATION
The Company's directors are not paid for attendance at regular
meetings. The Chairman of the Board is paid $1,900 per month. Each director
of the Company who is not an officer is paid $50 per hour for each Company
committee or special meeting attended.
All directors of the Company also currently serve as directors of
FPNB. Each FPNB director is paid $600 for each regular meeting attended. Each
director of FPNB is also paid for up to two meetings per year from which he is
absent. In addition, each receives $50 per hour for each FPNB committee or
special meeting attended.
On January 3, 1996, the Company's nonemployee directors were granted
nonqualified stock options under the Company's Amended and Restated 1988 Stock
Option Plan. See "Stock Option Plan," below. Each nonemployee director was
granted options to purchase 6,500 shares of Common Stock at a price of $8.75
per share, which was determined to be the fair market value of shares as of the
date of grant. The options were fully vested as of the grant date.
EMPLOYMENT ARRANGEMENTS
The executive officers of the Company, Harvey L. Williamson, Gary W.
Deems and Michael J. Perdue, have written employment agreements with the
Company and FPNB. All of these agreements are described below.
With regard to all of its employees, FPNB's overall compensation
program has been designed to attract and reward individuals who can
consistently perform with a high level of productivity and independence. FPNB
desires to employ only those individuals whose performance would clearly place
them in the upper half of its industry. It is also FPNB's desire to reward
employees based upon their personal productivity and to provide additional
levels of incentives and rewards to encourage them to attain higher levels of
responsibility within the organization.
In order to accomplish these goals, the FPNB compensation program
includes three basic elements:
A. Salary. This component is designed to compensate employees
for the basic duties they perform on a day-to-day basis.
B. Short-term Incentives. FPNB offers certain employees
additional potential compensation where the personal skills or efforts of each
individual can significantly and measurably produce results beyond the basic
expectations of the job. In most cases, these incentives will require both the
individual and FPNB to meet or exceed specific targets before the incentives
are paid.
C. Long-term Incentives. Executives with a critical impact on
FPNB's overall performance, who have demonstrated that they are capable of
meeting the high expectations of FPNB, may be eligible for additional long-term
incentives. These incentives are reserved for those with significant
management responsibilities and are usually tied to corporate performance over
a number of years.
Williamson Employment Agreement. On May 19, 1993, effective March 1,
1993, Mr. Williamson entered into an Employment Agreement (the "CEO Employment
Agreement") with FPNB and the Company relating to his duties as President and
Chief Executive Officer of FPNB. On January 11, 1995, the term of the CEO
Employment Agreement was extended three years to January 1, 1998. On August
27, 1996, the Company Board authorized the negotiation of a combination of the
CEO Employment Agreement with Mr. Williamson's Change of Control Agreement
(described below), and an extension of the CEO Employment Agreement through
December 31, 1998. FPNB employs Mr. Williamson under the CEO Employment
Agreement, but the Company has certain obligations underm the CEO Employment
Agreement.
Mr. Williamson's 1997 base salary is $176,000 per year, subject to
increase as mutually agreed upon by Mr. Williamson and FPNB. Additional
incentive compensation is at the discretion of FPNB. FPNB furnishes
8
<PAGE> 11
Mr. Williamson with an automobile and agrees to reimburse him for ordinary and
necessary expenses incurred on behalf of FPNB and certain other expenses
approved by the Board of Directors of FPNB. FPNB agrees to provide group life
insurance with a life insurance benefit of $100,000, plus reimburse Mr.
Williamson for the premium paid by Mr. Williamson for life insurance up to the
amount of premium for an additional $200,000 of coverage in group life
insurance. FPNB is currently providing group life insurance with a life
insurance benefit equal to two times Mr. Williamson's annual salary and a
whole life policy with a benefit of $150,000. Mr. Williamson is entitled to 22
days of vacation each calendar year.
FPNB may terminate Mr. Williamson with or without cause, as more
specifically set forth in the CEO Employment Agreement. The nature of the
termination, whether by Mr. Williamson or by FPNB, affects the extent and type
of post-termination benefits available to Mr. Williamson.
1. Salary and Benefits. In the event Mr. Williamson's employment
is terminated for willful breach or habitual neglect of duties, malfeasance or
misfeasance, immoral or illegal conduct (collectively referred to as "for
cause") or disability or death, upon termination, Mr. Williamson is paid
salary through the end of the month in which the termination occurs plus
accrued vacation time, and insurance benefits are extended for a period of
thirty days. In the event FPNB terminates Mr. Williamson for any other reason,
he is entitled to continuing salary and benefits for a period of at least six
months, insurance benefits are extended for one year and all accrued vacation
time is paid. None of the payments or benefits described in this paragraph
will be provided in the event Mr. Williamson voluntarily terminates his
employment.
2. Salary Continuation Provisions. Under certain circumstances,
upon termination of employment, the Company or FPNB is obligated to pay certain
amounts to Mr. Williamson, or his estate, as the case may be, over a period of
time. Upon retirement after age 65, or upon disability or death, as the case
may be, the Company is obligated to pay Mr. Williamson or his estate $60,000
per year, payable monthly, for a period of 180 months. In the event of
termination by FPNB, other than due to death or disability, FPNB is obligated
to pay Mr. Williamson $60,000 per year, payable monthly for a period of 180
months, subject to reduction of 20% for each year in age that Mr. Williamson is
under the age of 65 at the date of termination. None of these benefits may
overlap.
All payments to be made by FPNB or the Company are subject to offset
in the event Mr. Williamson is convicted of a crime causing damage to FPNB or
the Company or a judgment is obtained in favor of FPNB or the Company.
All termination benefits are subject to a limitation to the effect
that in the event a regulatory authority may deem the satisfaction of an
obligation by FPNB or the Company to be illegal, an unsafe and unsound
practice, or for some other reason not properly due or payable by FPNB or the
Company, the obligations shall not be satisfied. FPNB and the Company agree in
good faith to determine the position of the appropriate regulatory authority in
advance of each payment or benefit.
The CEO Employment Agreement also provides that FPNB will indemnify
Mr. Williamson in the event he is made a party to any action by a third party
provided certain criteria are met. Mr. Williamson must have acted in good
faith and in a manner he reasonably believed to be in the best interests of
FPNB, and his actions must have been taken within the course and scope of his
employment as an officer or employee of FPNB.
Deems and Perdue Employment Agreements. In April 1997, Mr. Deems and
Mr. Perdue (the "Executives," or individually, "Executive") each entered into
an Executive Employment Agreement (the "Executive Employment Agreements") with
FPNB and the Company relating to his duties as an executive officer of the
Company and FPNB. Each of the Executive Employment Agreements is effective
through December 31, 1998.
The 1997 base salary of each Executive is $137,000 per year, subject
to such increases, if any, as the Company and FPNB Boards approve. Additional
incentive compensation is at the discretion of the Company and FPNB Boards.
FPNB furnishes each Executive with an automobile and agrees to reimburse him
for ordinary and
9
<PAGE> 12
necessary expenses incurred on behalf of FPNB and certain other expenses
approved by the Chief Executive Officer of FPNB. FPNB agrees to provide group
life insurance with a life insurance benefit equal to the lower of two times the
annual salary of the Executive or the maximum amount permitted under FPNB's then
applicable group life insurance plan. The Executive is also entitled to basic
medical-dental and major medical with long-term disability income benefit
insurance ("Basic Health Benefits") to the same extent provided to all employees
of FPNB. Each Executive is entitled to 22 days of vacation each calendar year.
The FPNB Board may terminate the Executive with or without cause, as
more specifically set forth in each Executive Employment Agreement. The nature
of the termination, whether by the Executive or by the FPNB Board, affects the
extent and type of post-termination benefits available to the Executive.
In the event the Executive's employment is terminated for willful
breach or habitual neglect of duties, malfeasance or misfeasance, immoral or
illegal conduct (collectively referred to as "for cause"), or due to
disability, the Executive is paid salary through the end of the month in which
the termination occurs plus accrued vacation time, and Basic Health Benefits
are extended for a period of 30 days. In the event that the Executive's
employment is terminated due to death, the Executive's beneficiary is provided
with salary for a period of three months plus accrued vacation time, and Basic
Health Benefits are extended for a period of 90 days. In the event FPNB
terminates the Executive for any other reason, he is entitled to continuing
salary and benefits for a period of at least 12 months, Basic Health Benefits
are extended, except for long-term disability, for one year and all accrued
vacation time is paid.
None of the payments or benefits described above will be provided in
the event the Executive voluntarily terminates his employment. All termination
payments and benefits are subject to offset in the event the FPNB Board
determines that the Executive is liable to FPNB or the Company.
All termination benefits are subject to a limitation to the effect
that in the event a regulatory authority may deem the satisfaction of an
obligation by FPNB or the Company to be illegal, an unsafe and unsound
practice, or for some other reason not properly due or payable by FPNB or the
Company the obligations shall not be satisfied. FPNB and the Company agree in
good faith to determine the position of the appropriate regulatory authority in
advance of each payment or benefit.
Each Executive Employment Agreement also provides that FPNB will
indemnify the Executive in the event he is made a party to any action by a
third party provided certain criteria are met. The Executive must have acted
in good faith and in a manner he reasonably believed to be in the best
interests of FPNB, and his actions must have been taken within the course and
scope of his employment as an officer or employee of FPNB.
Change of Control Arrangements. On January 20, 1994, FPNB entered
into Change of Control Agreements with Mr. Williamson, Mr. Deems and Mr. Perdue
(the "Change of Control Agreements"). As of January 11, 1995, the term of the
Change of Control Agreements was extended to January 1, 1998. The Change of
Control Agreements of Mr. Deems and Mr. Perdue terminated in April 1997 when
they entered into the Executive Employment Agreements. The following
discussion summarizes the terms of Mr. Williamson's Change of Control Agreement
and the provisions of the Executive Employment Agreements that address the same
matters, all of which are referred to below as the "Change of Control
Agreements."
The purpose of these agreements is to assure the continued
availability of the services of these executives, especially in the event that
there is a potential or actual "Change of Control." A "Change of Control" is
defined in each Change of Control Agreement as:
(i) The issuance or transfer of sufficient shares of
stock, or the merger, reorganization or consolidation which results in
more than 50% of the voting stock of the Bank being owned by other
than the Company or persons who own 75% or more of the voting stock of
the Company prior to the transaction; or
10
<PAGE> 13
(ii) A merger, reorganization or consolidation, which
results in more than 50% of the voting stock of the Company being
owned by persons who are not holders of voting stock of the Company
prior to the transaction, or the acquisition of any person (as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934) or entity
of more than 50% of the voting stock of the Company.
Each of the Change of Control Agreements provides that in the event
employment of the executive is terminated by (i) FPNB, other than for willful
breach, habitual neglect, inability to perform or immoral or illegal conduct or
(ii) the executive, after the effective date of a reduction in base salary or
implementation of a requirement that the executive be based at a location more
than 35 miles from the headquarters or executive offices of FPNB or, in the
case of Mr. Williamson, more than 35 miles from any offices of FPNB on the date
of his Change of Control Agreement, certain severance benefits, as defined in
the Change of Control Agreements, (the "Severance Benefits") are payable in the
event additional conditions are met. The Severance Benefits are payable only
if the termination takes place after the earlier to occur of (i) FPNB or the
Company entering into a definitive agreement expected to result in a Change of
Control or (ii) a Change of Control. The Severance Benefits are not payable
with respect to any termination occurring more than two years after the date of
a Change of Control. In the event that after a definitive agreement expected
to result in a Change of Control is entered into, but the transaction is not
consummated, the Severance Benefits would cease to be available at such time
with respect to that transaction.
The Severance Benefits are (i) a lump sum payment of an amount equal
to one year's salary, plus, in the cases of Mr. Deems and Mr. Perdue, the pro
rata portion of the bonus that the executive would have earned through the date
of termination under the most recently in force executive bonus plan, all due
within one month after the date of termination in the case of Mr. Williamson,
and all due within one month of the later of the date of termination and the
occurrence of a Change of Control in the cases of Mr. Deems and Mr. Perdue and
(ii) continuation of benefits for a period of one year. The benefits included
in the Severance Benefits are health insurance benefits and use of the
automobile provided under the relevant employment agreement. Mr. Williamson's
Employment Agreement specifically provides that in the event of a Change of
Control, defined with the same language as in the Change of Control Agreements,
even if he is not terminated, the Company is obligated to pay him $60,000 per
year payable monthly for a period of 180 months. The Change of Control
Agreement for Mr. Williamson provides that if he receives all his benefits
under his Employment Agreement, he will receive none under his Change of
Control Agreement. However, if payments under his Employment Agreement cease
before they are permitted to cease, his full Severance Benefits shall be paid
at that time.
11
<PAGE> 14
EXECUTIVE COMPENSATION
The following table and accompanying notes present the aggregate
indicated compensation paid by the Company and FPNB during 1996 and, to the
extent required by applicable rules, during the preceding two fiscal years to
the Chief Executive Officer and the two other executive officers of the Company
as of December 31, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- ------------
SECURITIES
UNDERLYING OTHER
NAME AND SALARY BONUS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#) ($)
------------------ ---- --------------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Harvey L. Williamson 1996 $171,000 $45,772 (1) 5,000 $8,200 (2)
President and Chief Executive 1995 167,907 (3) 60,000 (4) 0 6,700 (5)
Officer 1994 150,000 20,510 (6) 40,000 (7) 2,896 (8)
Michael J. Perdue 1996 133,000 45,772 (1) 15,000 4,500 (9)
Executive Vice President and 1995 125,000 60,000 (4) 0 3,000 (9)
Chief Operating 1994 127,846 (10) 20,510 (6) 30,000 (11) 1,500 (9)
Officer
Gary W. Deems 1996 133,000 45,772 (1) 15,000 4,500 (9)
Executive Vice President, 1995 125,000 60,000 (4) 0 3,000 (9)
Chief Administrative 1994 120,000 20,510 (6) 30,000 (12) 1,400 (9)
Officer and Secretary
- --------------------
</TABLE>
(1) Bonuses earned in 1996 but paid in 1997.
(2) $4,500 represents discretionary employer matching contributions to the
First Pacific National Bank 401(k) Savings Plan, and $3,700 represents
the premium paid by the Bank for a whole life insurance policy for the
benefit of Mr. Williamson.
(3) Includes $7,407 payment in lieu of accrued vacation.
(4) Bonuses earned in 1995 but paid in 1996.
(5) $3,000 represents discretionary employer matching contributions to the
First Pacific National Bank 401(k) Savings Plan, and $3,700 represents
the premium paid by the Bank for a whole life insurance policy for the
benefit of Mr. Williamson.
(6) Bonuses earned in 1994 but paid in 1995.
(7) This entry reflects (i) the issuance of options to purchase 25,244
shares at an exercise price of $6.00 per share granted on November 23,
1993 (representing 22.57% of the employee options granted during 1993,
subject to stockholder approval of an increase in the number of shares
of Common Stock available for issuance under the Option Plan; such
approval was obtained at the annual stockholder meeting on May 17,
1994) and repriced to $5.15 per share on September 27, 1994, (ii) the
repricing of options outstanding at an exercise price of $6.00 per
share as to 9,610 shares to reflect the decline in the fair market
value of the Common Stock on September 27, 1994 to $5.15 per share and
(iii) the additional issuance of options to purchase 5,146 shares at
an exercise price of $6.00 per share granted on June 21, 1994 and
repriced to $5.15 per share as of September 27, 1994.
(8) $1,000 represents discretionary employer matching contributions to the
First Pacific National Bank 401(k) Savings Plan; and $1,896 represents
the premium paid by FPNB for a whole life insurance policy for the
benefit of Mr. Williamson.
(9) Represents discretionary employer matching contributions to the First
Pacific National Bank 401(k) Savings Plan.2135
(10) Includes $7,846 payment in lieu of accrued vacation.
(11) This entry reflects (i) the issuance of options to purchase 20,000
shares at an exercise price of $6.00 per share granted on November 23,
1993 (representing 17.88% of the employee options granted during 1993,
subject to stockholder approval of an increase in the number of shares
of Common Stock available for issuance under the Option Plan; such
approval was obtained at the annual stockholder meeting on May 17,
1994) and repriced to $5.15 per share on September 27, 1994 and (ii)
the repricing of options outstanding at an exercise price of $6.00 per
share as to 10,000 shares, to reflect the decline in the fair market
value of the Common Stock on September 27, 1994 to $5.15 per share.
(12) This entry reflects the issuance of options to purchase 30,000 shares
at an exercise price of $6.00 per share granted on November 23, 1993
(representing 26.82% of the employee options granted during 1993,
subject to stockholder approval of an increase in the number
12
<PAGE> 15
of shares of Common Stock available for issuance under the Option
Plan; such approval was obtained at the annual stockholder meeting on
May 17, 1994) and repriced to $5.15 per share on September 27, 1994.
Bonus Plans. For 1996, the 1996 Management Incentive Compensation
Plan (the "1996 Plan") was established which provided an incentive pool based
on an "Adjusted Return on Beginning Equity" ("AROE"), as defined in the 1996
Plan. The 1996 Plan resulted in a pool of 5% of "adjusted profit", as defined
in the plan. Messrs. Williamson, Perdue and Deems were each allocated 22% of
the pool for purposes of calculating their bonuses for 1996.
For 1997, the 1997 Management Incentive Compensation Plan (the "1997
Plan") was established to provide an incentive pool for senior management and
other FPNB employees. Like the 1996 Plan, the 1997 Plan is based on AROE and
the incentive pool may range from 0% to 6.5% of adjusted net income, depending
on FPNB's results of operations for 1997. Messrs. Williamson, Perdue and Deems
are each allocated 25% of the pool for purposes of calculating their bonuses
for 1997.
Certain Noncash Compensation. The Company provides and intends to
continue to provide each of Messrs. Williamson, Perdue and Deems with an
automobile. The value of the automobile which relates to personal use is
reported as taxable personal income at the end of each year. Such noncash
compensation allocable to each executive officer does not exceed 10% of the
cash compensation of such executive officer and the aggregate of such
compensation does not exceed 10% of the aggregate cash compensation paid to
executive officers.
STOCK OPTION PLAN
The Amended and Restated 1988 Stock Option Plan (the "Option Plan")
was originally effective in 1988, was subsequently amended three times, and was
amended and restated in 1996 with the approval of the stockholders. The Option
Plan currently authorizes the issuance of options to purchase up to 500,000
shares of Common Stock. Options to purchase 230,224 shares were available for
grant as of December 31, 1996 and options to purchase 246,126 shares were
outstanding at that date.
Under the Option Plan, options may be granted to employees of the
Company, any parent or subsidiary, and directors of the Company, to purchase
shares of Common Stock. The Option Plan is designed to enable the Company and
its subsidiary to attract, retain and motivate eligible persons by providing
for or increasing proprietary interests of such persons in the Company. The
Option Plan provides for options which qualify as incentive stock options
("ISO's") under Section 422 of the Internal Revenue Code of 1986, as amended,
as well as "nonqualified" stock options ("NQO's"). Unless terminated earlier
by the Board, the Option Plan will terminate on January 17, 1998.
Administration of the Option Plan. The Option Plan is administered by
the Board. At its discretion, the Board may appoint a committee (the
"Committee") of not less than three members of the Board to administer the
Option Plan. A member of the Committee shall not be eligible to vote upon or
approve the granting of any option under the Option Plan to such member.
The interpretation and construction by the Board or the Committee of
any term or provision of the Option Plan or of any option granted under it
shall be final. The Board or the Committee may from time to time adopt rules
and regulations for carrying out the Option Plan and, subject to the provisions
of the Option Plan, may prescribe the form or forms of the instruments
evidencing any option granted under the Option Plan.
Subject to the provisions of the Option Plan, the Board or the
Committee shall have full and final authority in its discretion to select the
persons to be granted options, to grant such options and to determine the
number of shares to be subject thereto, the exercise prices, the terms of
exercise, expiration dates and other pertinent provisions thereof.
13
<PAGE> 16
The Board has the right to amend, suspend or terminate the Option Plan
at any time; provided, however, that no such action shall affect or in any way
impair the rights of an optionee under the option previously granted under the
Option Plan without the consent of the optionee or the transferee of the
option; and provided further that no such action, without approval of the
stockholders, may: (a) increase the total number of shares of stock which may
be sold or transferred pursuant to options granted under the Option Plan; (b)
change the designation of class or persons eligible to participate in the
Option Plan; (c) decrease the minimum option price specified in the Option
Plan; (d) extend the maximum term of options granted thereunder; or (e) extend
the term of the Option Plan.
Eligibility. Key employees of the Company, a parent or subsidiary of
the Company, and directors of the Company, are eligible to receive options
under the Option Plan, as selected by the Board or the Committee. No options
may be granted to an employee who owns stock, and possesses more than 10% of
the total combined voting power of all classes of stock of the Company.
There is no limit upon the number of shares that may be issued under
NQO's under the Option Plan to any one employee or director. However, the
aggregate fair market value of the stock subject to ISO's granted to any one
employee as to which ISO's are exercisable for the first time during any
calendar year may not exceed $100,000, with fair market value determined as of
the time each respective option is granted. For purposes of such
determination, all ISO's under the Option Plan and under all stock option plans
of the Company, its parents and subsidiaries, are included.
Shares Covered by the Option Plan. The maximum number of shares of
stock for which options may be exercised is 500,000 shares of Common Stock,
subject to the adjustments described below. Shares of stock subject to the
unexercised portions of any options granted under the Option Plan which expire,
terminate or are canceled may again be subject to options under the Option
Plan.
The number and/or kind of shares covered by the Option Plan is subject
to proportionate adjustment if the outstanding shares of Common Stock are
changed in number or kind by reason of stock splits, stock dividends, corporate
reorganizations, recapitalization or the like. The number and/or kind of
shares covered by outstanding options issued under the Option Plan are also
subject to adjustment upon the occurrence of any such event. Any such
adjustment in outstanding options shall be made without changing the aggregate
exercise price applicable to the unexercised portions of such options, but with
a corresponding adjustment in the exercise price per share.
Option Terms. The exercise price which must be paid for Common Stock
upon exercise of any option may not be less than 100% of the fair market value
of the stock on the date the grant of the option is approved by the Board or
Committee.
All options are nontransferable other than upon the optionee's death
by will or the laws of descent and distribution, may not be pledged or
hypothecated and are exercisable during the optionee's lifetime only by the
optionee.
No option granted under the Option Plan may be exercised in whole or
in part more than ten years after its date of grant. The exercise or vesting
periods for the options granted under the Option Plan are set forth in the
individual option agreements at the Board or Committee's discretion; provided,
however, that vesting is required to occur at the rate of at least 20% per year
over a five-year period. With respect to options that vest upon completion of
whole years of completed employment or service, the optionee is credited with a
whole year of continuous employment or a whole year of service with respect to
an optionee who is a director, only if employment or service during that year
has not been interrupted by any absence other than on duly granted leave or due
to sickness for a period of not more than 90 days. Vesting may be accelerated
upon the occurrence of certain events. See "Corporate Reorganization," below.
Subject to the limitations imposed by the Option Plan and applicable
law, the Board or Committee determines the time or times and the conditions
under which each option is exercisable. Options granted under the Option Plan
may become exercisable in installments if specified in the individual option
agreements, and in
14
<PAGE> 17
that case, the installments are cumulative so that each matured but unexercised
installment remains exercisable until the entire option expires or is
terminated.
Upon exercise of an option under the Option Plan, the stock purchased
must be paid for in full. Payment for stock upon exercise of an option
generally must be in cash, but option agreements for NQO's under the Option
Plan may allow the optionee to pay for optioned shares upon exercise of options
wholly or partially in installments. All funds received or held by the Company
under the Option Plan will be included in the general funds of the Company free
of any trust or other restriction and may be used for any corporate purpose.
No interest will be paid to any participant or credited under the Option Plan.
Termination of Options. Each option may terminate no later than ten
years from its date of grant, provided that an option may terminate earlier, as
provided in "Corporate Reorganization," below, or as described in the
following:
(i) Termination of Employment. If the optionee's
employment with the Company or any of its parents or subsidiaries or the
optionee's service as a director of the Company terminates for any reason other
than death, then only that portion of the option exercisable at the time of
termination may be exercised for a period not to exceed 30 days thereafter, but
in no case after its stated expiration date. If termination is by reason of
the optionee's retirement (with the Company's written consent), the period of
exercise shall be extended to three months, but in no case beyond its stated
expiration date. If termination is by reason of the optionee's permanent and
total disability, the period of exercise shall be extended to one year, but in
no case beyond the stated expiration date.
(ii) Death of Optionee. If the optionee dies during the
term of the option, the portion of the option exercisable at the time of the
optionee's death may be exercised for one year thereafter, but not after it
expires by its terms, by the optionee's legal representatives or by the person
to whom the optionee's rights under the option pass by will or the laws of
descent and distribution.
(iii) Extended Exercise. Notwithstanding the termination
provisions described above, the Board or Committee will be able to enter into
option agreements that extend the period of exercise through the expiration
date of an option.
Corporate Reorganization. In the event of a merger, reorganization or
consolidation and/or change or control, each outstanding option shall pertain
to and apply to the securities to which the holder of the number of shares
subject to the option would have been entitled, and shall continue in full
force and effect notwithstanding any such event. A "change of control" is
defined as the issuance or transfer of sufficient shares of stock, or a merger,
reorganization or consolidation which results in more than 50% of the voting
stock of FPNB or its successor being owned by other than the Company or persons
who own 75% or more of the voting stock of the Company prior to the
transaction; or a merger, reorganization or consolidation which results in more
than 50% of the voting stock of the Company being owned by persons who are not
holders of voting stock of the Company prior to the transaction or the
acquisition by any person (as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934) or entity of more than 50% of the voting stock of the
Company.
In addition, in the event of a "change of control," each option
outstanding under the Option Plan shall be automatically, without further
action by any party, fully vested and exercisable to the extent not previously
vested or exercisable. In the event that the optionee's employment or service
as a director with the Company or a subsidiary is terminated, other than by the
Company or subsidiary for cause, within one year after a change of control, the
option shall remain exercisable for a period of the longer of one year from the
date of termination or the period during which the option would otherwise
remain exercisable following such termination.
15
<PAGE> 18
OPTION GRANTS TABLE
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
NAME AND OPTIONS EMPLOYEES IN BASE EXPIRATION
PRINCIPAL POSITION GRANTED (#) FISCAL YEAR PRICE ($/SH)(1) DATE
- ------------------ ----------- ----------------- --------------- -------------
<S> <C> <C> <C> <C>
Harvey L. Williamson 5,000 (2) 11.76% $8.75 June 25, 2006
Michael J. Perdue 15,000 (3) 35.29% $8.75 June 25, 2006
Gary W. Deems 15,000 (3) 35.29% $8.75 June 25, 2006
</TABLE>
- ---------------
(1) Exercise prices for stock options were set at the fair market value as
determined by the Board of Directors of the Company after taking into
consideration prices at which shares of the Common Stock have been
recently sold and purchased, the number of shares traded, the current
business and prospects of the Company and the results of recent
evaluations and trends in the performance of the Company's assets and
the performance of existing management as well as other factors, which
in the Board of Director's judgment, affect the fair market value of
the Common Stock, including the trends in prices of shares of
institutions of similar sizes.
(2) Options vest over a period of two years at a rate of 50% annually.
(3) Options vest over a period of three years at a rate of 33 1/3%
annually.
No options granted to Messrs. Williamson, Perdue or Deems were
exercised or repriced during the year ended December 31, 1996. The following
table presents information on the number of unexercised options and the value
of such options at that date.
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN 1996 AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996(1)
SHARES ACQUIRED VALUE --------------- -----------------
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
Harvey L. Williamson N/A N/A 40,000/5,000 $244,000/$12,500
Michael J. Perdue N/A N/A 28,000/17,000 $170,800/$49,700
Gary W. Deems N/A N/A 30,000/15,000 $183,000/$37,500
</TABLE>
_________________________________
(1) Values are based upon the difference between the exercise price and the
fair market value of $11.25 per share as of December 31, 1996.
16
<PAGE> 19
EMPLOYEE STOCK OWNERSHIP PLAN
The FP Bancorp Employee Stock Ownership Plan (the "ESOP") enabled
eligible employees, as defined in the ESOP, to participate in the growth and
prosperity of the Company through stock ownership achieved through employer
contributions to purchase stock of the Company. On January 23, 1996, the Board
of Directors of the Company approved the termination of the ESOP pending
approval of the Internal Revenue Service, which was received effective April 1,
1996. Upon termination of the ESOP, all participants became fully vested in
their assets. ESOP termination costs have been paid by the Company.
401(K) SAVINGS PLAN
Effective January 1, 1994, FPNB implemented the First Pacific National
Bank 401(k) Savings Plan ("401(k) Plan"). The 401(k) Plan is a defined
contribution plan covering full-time and part-time employees who have completed
six full months of employment with FPNB. Temporary employees are excluded from
401(k) Plan participation. The 401(k) Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974.
The Trustee and Administrator of the 401(k) Plan is Union Bank of
California ("Union Bank"). The 401(k) Plan provides for participant-directed
accounts which allow participants to allocate their account balances to the
following Union Bank investment funds: Stepstone Stable Value Income Fund,
Stepstone Balanced Fund and Stepstone Value Momentum Fund. A fourth fund,
Fidelity's Contrafund, is also offered. The participants in the 401(k) Plan
may also allocate up to 50% of their deferral to an investment in Common Stock.
Participants' accounts are credited or debited with investment
earnings or losses at the end of each calendar quarter. FPNB contributed
$138,000 and $80,000 as discretionary contributions for the years ended
December 31, 1996 and 1995, respectively. The contribution in 1996 was a match
based on 50% of the aggregate of the participants' first 6% of salary
withholdings. The 1995 contribution was a match based on 50% of the aggregate
of the participants' first 4% of salary withholdings.
CERTAIN TRANSACTIONS
There are no existing or proposed material interests or transactions
between the Company and any of its directors or officers outside the ordinary
course of the Company's business, except as indicated herein. FPNB entered
into a lease agreement for office space in a building in which the headquarters
of FPNB and the Company are located. Management of the Company believes the
terms of such lease agreement are fair and reasonable. The lessor is Grand
Avenue Financial Center Partnership, a California general partnership composed
of the following general partners: NB Partnership (a California general
partnership in which Mark N. Baker is a general partner), Earl E. Frey, Jr., as
trustee, Wexler 638 Partnership (of which Michael W. Wexler is a general
partner), and West Coast Investment. Messrs. Baker, Frey and Wexler are
directors of FPNB and the Company.
The lease agreement and subsequent amendments currently cover
approximately 16,642 square feet, including 6,643 square feet on the east side
of the ground floor. It is for a period of ten to thirty-five years (depending
on the part of the building leased), and commenced on or about July 1, 1984.
Rent for the space currently covered by the lease agreement is $300,000 per
year.
Certain of the Company's directors are indebted to FPNB for loans
which were made in their ordinary course of business on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons and did not involve more than
normal risk of uncollectability or present unfavorable features. As of
December 31, 1996, such loans represented approximately 26.92% of stockholders'
equity and 2.61% of gross loans outstanding of the Company. The activity for
loans made by FPNB to directors, executive officers and their affiliates was as
follows:
17
<PAGE> 20
LOANS TO DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATES
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1996 1995
---- ----
<S> <C> <C>
Balance at beginning of year . . . . . . . $ 4,270,000 $ 2,690,000
Additions . . . . . . . . . . . . . . . . . 5,287,000 2,311,000
Collections and other decreases . . . . . . (3,909,000) (731,000)
----------- -----------
Balance at end of year . . . . . . . . . . $ 5,648,000 $ 4,270,000
=========== ===========
</TABLE>
It is anticipated that the directors and executive officers of the
Company and the companies with which they are associated will continue to have
banking transactions with FPNB in the ordinary course of their business. It is
the firm intention of management of the Company that any loans and commitments
to loan included in such transactions be made in accordance with applicable law
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other person of
similar creditworthiness and on terms not involving more than the normal risk
of collectability or presenting other unfavorable features.
COMPLIANCE WITH FILING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires that directors, executive officers and beneficial owners of 10%
or more of outstanding shares ("Insiders") of companies with shares registered
under the Exchange Act, such as the Company, make filings with the Securities
and Exchange Commission (the "SEC"), reporting their direct and indirect
ownership and acquisition and disposition of shares of stock. The SEC has
adopted rules implementing Section 16(a) (the "Reporting Rules") that are quite
complex and interpretive advice of the SEC concerning these rules is often
sought by registrants.
Effective May 1, 1991, the SEC adopted new Reporting Rules
implementing Section 16(a) and also adopted a rule requiring the registrant to
disclose in its proxy statement any instances of noncompliance by any Insiders.
The SEC adopted this requirement largely because of what it believed was a
relatively high level of noncompliance with the Reporting Rules previously in
effect.
The Company has had a program in effect to assist its directors and
executive officers in complying with the Reporting Rules since its shares
became registered under the Exchange Act. The Company believes that this
program effectively helps prevent most unintentional failures to comply with
the reporting provisions. The Company, based on its review of filings by
Insiders under the Reporting Rules, believes there were three failures to
comply in 1996. These consisted of the following: Mr. Williamson acquired 101
shares, in November 1996, but filed a Form 5 on December 31; Mr. Richard
Spanjian acquired 3,000 shares on January 27, 1996 and 2,000 shares on January
29, 1996, but did not report the transaction until March 5, 1996; and Mr.
Robert Spanjian sold 5,016 shares on February 28, 1996, but did not report the
transaction until March 12, 1996.
The Company believes that its compliance program will continue to keep
unintentional failures to comply to a minimum, but expects that from time to
time there may be failures to comply because of the complexity of the Reporting
Rules.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF ALL
OF THE NOMINEES NAMED ABOVE, AS DIRECTORS OF THE COMPANY TO SERVE FOR THE
RESPECTIVE TERMS INDICATED UNDER THIS PROPOSAL I.
18
<PAGE> 21
PROPOSAL II
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITOR
In recognition of the important role of the independent auditor, the
Board has determined that its selection of an independent auditor for the
Company should be submitted to the stockholders of the Company for ratification
on an annual basis. The Board, upon the recommendation of its Audit Committee,
has appointed KPMG Peat Marwick LLP to serve as the Company's independent
auditor for the fiscal year ending December 31, 1997, subject to ratification
by the stockholders of the Company. KPMG Peat Marwick LLP conducted the audit
of the Company's financial statements for the fiscal year ended December 31,
1996. If the appointment is not ratified, the Board will appoint another firm
as the Company's independent auditor for the fiscal year ending December 31,
1997. The Board also retains the power to appoint another independent auditor
for the Company to replace an auditor ratified by the stockholders in the event
the Board determines that the interests of the Company require such a change.
Representatives of KPMG Peat Marwick LLP are expected to be present at
the Meeting, will have the opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
The affirmative vote of at least a majority of the shares of the
Company represented at the Meeting is required in order to ratify the
appointment of the independent auditor.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITOR OF THE COMPANY
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997 UNDER THIS PROPOSAL II.
OTHER MATTERS
The Board does not know of any matters to be presented to the Meeting
other than those presented above. However, if other matters come before the
Meeting, it is the intention of the persons named in the accompanying Proxy to
vote said Proxy in accordance with the recommendation of the Board on such
matters, and discretionary authority to do so is included in the Proxy.
To the extent that information contained in this Proxy Statement is
peculiarly within the knowledge of persons other than the Company, the Company
has relied on such persons for the accuracy and completeness thereof.
ANNUAL REPORT
The Company's Annual Report for the year ended December 31, 1996 is
being mailed to stockholders of record with this Proxy Statement.
THE COMPANY WILL ALSO PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL
REPORT ON FORM 10-KSB, INCLUDING FINANCIAL STATEMENTS AND RELATED FINANCIAL
STATEMENT SCHEDULES, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UPON
REQUEST IN WRITING FROM ANY PERSON WHO WAS A HOLDER OF RECORD OR WHO REPRESENTS
IN GOOD FAITH THAT HE OR SHE WAS A BENEFICIAL OWNER OF COMMON STOCK OF THE
COMPANY ON MARCH 31, 1997. ANY SUCH REQUEST SHOULD BE ADDRESSED TO THE
SECRETARY OF THE COMPANY AT 613 WEST VALLEY PARKWAY, ESCONDIDO, CA 92025.
19
<PAGE> 22
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the
Company's proxy materials for the Company's Annual Meeting of Stockholders to
be held in 1998 must be received at the principal executive office of the
Company at 613 West Valley Parkway, Escondido, California 92025, no later than
December 26, 1997. The Board will review each proposal so received to
determine if it satisfies the criteria established by applicable law for
inclusion in the Company's 1997 proxy materials.
You are urged to sign and return your Proxy promptly to make certain
your shares will be voted at the Meeting. For your convenience, a return
envelope is enclosed requiring no additional postage if mailed in the United
States.
Dated: April 16, 1997 FP BANCORP, INC.
____________________________
GARY W. DEEMS, Secretary
20
<PAGE> 23
PROXY
FP BANCORP, INC. ANNUAL MEETING OF STOCKHOLDERS
MAY 27, 1997
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT
The undersigned hereby appoints Mark N. Baker, Earle W. Frey, Jr., and
Robert M. Spanjian or any of them (with full power to act alone) as my true and
lawful attorney(s) and proxies, with full power of substitution, to represent,
to vote, and to act with respect to all shares of common stock of FP Bancorp,
Inc. (the "Company") which the undersigned would be entitled to vote, at the
annual meeting of stockholders to be held May 27, 1997, at 5:30 p.m., at The
California Center for the Arts, Escondido, 340 North Escondido Boulevard,
Escondido, California 92025, or any adjournments thereof. Receipt of the Proxy
Statement dated April 16, 1997 is hereby acknowledged. Said proxies are
instructed to vote or act upon the following matters set forth in the Proxy
Statement with all the powers the undersigned would possess if present as set
forth below.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE WITH AUTHORITY ON THE BOARD'S
PROPOSAL NO. 1, AND FOR PROPOSAL NO. 2.
1. Election of all nominees listed below (except as marked to the contrary
below) as Directors of the Company (with the proxies having discretionary
authority to cumulate votes):
Earle W. Frey, Jr., Robert W. Klemme, Randall C. Luce, Michael J. Perdue,
Robert M. Spanjian, Michael W. Wexler and Harvey L. Williamson.
<TABLE>
<S> <C>
[ ]WITH AUTHORITY for all nominees listed above [ ]WITHOUT AUTHORITY to vote for all
(except as marked to the contrary below.) nominees listed above.
</TABLE>
2. Ratification of the appointment of KPMG Peat Marwick LLP as the independent
auditor for 1997: [ ] FOR [ ] AGAINST [ ] ABSTAIN
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), WRITE THE
NAME OF THE NOMINEE(S) IN THE SPACE BELOW.
- --------------------------------------------------------------------------------
(Continued on other side)
<PAGE> 24
3. To transact such other business as may properly come before the meeting and
any adjournment thereof.
PLEASE SIGN AND DATE BELOW
This proxy confers authority to vote and shall be voted in accordance with
your instruction as specified above. IF NO INSTRUCTION IS SPECIFIED IN RESPECT
TO A MATTER TO BE ACTED UPON, THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED
"WITH AUTHORITY" FOR PROPOSAL NO. 1, THE ELECTION OF THE SEVEN DIRECTOR
NOMINEES, AND "FOR" PROPOSAL NO. 2. IF ANY OTHER BUSINESS IS PRESENTED AT THE
MEETING, THIS PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED IN ACCORDANCE WITH
RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
[ ] I DO [ ] I DO NOT expect to attend the meeting.
Dated:, 1997
-------------------------
(Please print your name)
-------------------------
(Please print your name)
-------------------------
(Signature(s) of
Stockholder(s))
(Please date this proxy
and sign your name(s) as
it appears on your stock
certificate(s). Executors,
administrators, trustees,
and others signing in a
fiduciary capacity should
give their full title.
All joint owners should
sign.)
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT AND MAY BE REVOKED PRIOR TO
ITS EXERCISE BY FILING WITH THE SECRETARY OF THE COMPANY A DULY EXECUTED PROXY
BEARING A LATER DATE OR AN INSTRUMENT REVOKING THIS PROXY OR VOTING IN PERSON AT
THE MEETING.
