PROXY STATEMENT
SOLICITATION, VOTING AND REVOCABILITY OF PROXY
General
The enclosed Proxy is solicited on behalf of the Board of Directors of
Timberline Bancshares, Inc. ("Bancshares") for use at the 1998 Annual
Meeting of Shareholders ("Annual Meeting") to be held on May 14, 1998.
Only shareholders of record on March 23, 1998 will be entitled to vote
at the meeting. There were 1,006,726 shares of Bancshares Common Stock
("Common Stock") issued and outstanding on that date.
The principal executive offices of Timberline Bancshares, Inc. and its
subsidiary, Timberline Community Bank (collectively, the "Company") are
located at 123 N. Main Street, Yreka, California 96097. The approximate
date on which this Proxy Statement and the accompanying Proxy are being
sent to shareholders is April 10, 1998.
Voting
The presence, in person and by proxy, of a majority in number of the
outstanding shares of Common Stock entitled to vote at this Annual
Meeting shall constitute a quorum for the transaction of business.
The approval of Proposal 1 (the election of Directors) normally requires
the affirmative vote of a majority of shares of Common Stock present and
voting, with each shareholder entitled to one vote per share of Common
Stock owned. However, in certain circumstances, the election of
directors may be subject to cumulative voting. Cumulative voting
entitles each shareholder to as many votes as is equal to the number of
directors to be elected, multiplied by the number of shares owned by
such shareholder. Under cumulative voting, each shareholder may
distribute his or her votes between one or more nominees as he or she
sees fit. Shares of common stock owned by each shareholder are entitled
to be voted cumulatively if any shareholder present at the Annual
Meeting has given notice at the Annual Meeting prior to the voting of
his or her shares, of his or her intention to vote his or her shares
cumulatively. If any shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. In
the election of directors, the seven (7) candidates receiving the
highest number of votes will be elected. Discretionary authority to
cumulate votes is hereby solicited by the Board of Directors.
The approval of Proposal 2 (adoption of the Timberline Bancshares, Inc.
1998 Stock Option Plan (the Plan). Adoption of the Plan requires the
affirmative vote of a majority of the outstanding shares of Common Stock
represented and voting. Each shareholder is entitled to one vote for
each share of Common Stock held by him or her when voting on Proposal 2.
There is no cumulative voting permitted with respect to Proposal 2.
The approval of Proposal 3 (the ratification of appointment of
accountants) require the affirmative vote of a majority of shares of
Common Stock present and voting. Each shareholder is entitled to one
vote for each share of Common Stock held by him or her when voting on
Proposal 3. There is no cumulative voting permitted with respect to
Proposal 3.
Revocability of Proxies
Shareholders who give a proxy may revoke it at any time prior to
exercise by filing a written request with Bancshares' Secretary, by
voting in person, or by presenting a duly executed proxy bearing a later
date.
Solicitation
Solicitation of proxies will be by mail and the entire cost of
preparing, assembling, printing and mailing this Proxy Statement, the
accompanying Proxy and all other items pertaining thereto will be borne
by the Company.
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INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Boards of Timberline Bancshares, Inc. and its sole subsidiary,
Timberline Community Bank ("Bank") are comprised of the same persons.
During 1997, the Bank's Board of Directors held 11 regular meetings.
All Bank directors attended at least 75% of the regular meetings of the
Bank's Board of Directors and Board committee meetings. The Bancshares
Board of Directors held three meetings. All directors attended at least
75% of the meetings.
During 1997, Bank Directors (other than the Secretary of the Bank) who
were not otherwise employed by the Bank received a monthly payment of
$400.00. The Secretary of the Bank received a payment of $600.00 per
month. The aggregate amount of Directors' fees paid in 1997 by the Bank
was $36,000. It is anticipated that the compensation for non-employee
Directors will remain the same during 1998.
During 1997, Bancshares and the Bank's Boards of Directors had several
standing committees, including an Audit Committee and a Personnel
Committee. There was no standing nominating committee; however, the
procedures for nominating directors, other than nomination by the Board
of Directors itself, are set forth in the Bylaws and in this Proxy
Statement (see Section of "Proposals of Shareholders").
The functions, composition and frequency of meetings for the Audit and
Personnel Committees in 1997 were as follows:
Audit Committee - The Audit Committee was composed of Richard S. Day,
Chairman; Don L. Hilton, and Elmo Smith. The Committee provides general
oversight of the internal audit function, reviews the findings of
external audits and examinations, evaluates the adequacy of insurance
coverages, and reviews the activities of the compliance committee.
During 1997 two (2) meetings were held.
Personnel Committee - The Personnel Committee was composed of Don L.
Hilton, Chairman; Robert E Banning, Vice-Chairman; and the full
complement of the Board. The Personnel committee conducts an annual
review of various compensation issues, including salary budgets,
compensation plans and personnel policy. During 1997 two (2) meetings
were held.
ELECTION OF DIRECTORS
(PROPOSAL 1)
At the 1998 Annual Meeting of Shareholders, seven (7) directors are
being considered for election, each to hold office for a one year term
and thereafter until his or her successor has been elected and
qualified. The Board's nominees are shown below along with biographical
summaries and beneficial ownership of Bancshares' Common Stock. The
information is presented as of March 1, 1998.
All director nominees have previously been elected by Company
shareholders. No director nominee listed below holds any other
directorships in a company with a class of securities registered
pursuant to Section 12 of the Exchange Act.
In the event a nominee declines or is unable to serve as a director,
which is not anticipated, the shares represented by proxy will be voted
for the Board's substitute nominee.
Bancshares' Board of Directors knows of no person who beneficially owns
more than 5% of the outstanding Common Stock of Bancshares as of March
1, 1998, with the exception of director nominees Gareld J. Collins,
Norman E. Fiock, Don L. Hilton and Robert J. Youngs, and Director
Emeritus, Charles J. Cooley. Charles J. Cooley, Director Emeritus, owns
beneficially 63,244 or 6.28%.
The beneficial ownership of Bancshares Common Stock by such individuals
is shown in the chart listing director nominees, as found on the
following page.
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Unless otherwise indicated, each director has sole investment and voting
power (or shares such power with his or her spouse) with regard to the
shares set forth in the following table. The source of the information
provided in the table is Bancshares' records.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE DIRECTOR NOMINEES
SHOWN IN THE FOLLOWING TABLE BE ELECTED AS DIRECTORS OF
TIMBERLINE BANCSHARES, INC.
NOMINEE, AGE AND YEAR PRINCIPAL OCCUPATION SHARES OF COMMON STOCK
FIRST BECAME DIRECTOR DURING PAST FIVE YEARS BENEFICIALLY OWNED ON
March 1, 1998
ROBERT E. BANNING Retired Agri - Businessman 7,335 direct .73%
Age 83
Elected (Bank) 1981
Elected (Bancshares) 1991
GARELD J. COLLINS General Partner, Enterprises 6.19%
Age 84 Investments 62,366 indirect(1)
Elected (Bank) 1979
Elected (Bancshares) 1991
RICHARD S. DAY (4) Secretary, Timberline 13,800 direct 1.37%
Age 80 Bancshares, Inc.
Elected (Bank) 1979 Timberline Community Bank
Elected (Bancshares) 1991 Retired Business Executive
NORMAN E. FIOCK Chairman of the Board, 8.27%
Age 73 Timberline Bancshares, Inc. 83,316 indirect (2)
Elected (Bank) 1979 and Timberline Community Bank
Elected (Bancshares) 1991 Retired cattle rancher and farmer
DON L. HILTON President, Don Hilton Ent. 72,646 direct 7.37%
Age 61 and Shasta Holiday, Inc., 1,500 indirect (3)
Elected (Bank) 1981 Mt. Shasta, Ca
Elected (Bancshares) 1991
ELMO M. SMITH (5) Retired banker 14,988 direct 1.49%
Age 78
Elected (Bank) 1979
Elected (Bancshares) 1991
ROBERT J. YOUNGS President and C.E.O. 71,364 direct 7.09%
Age 63 Timberline Bancshares, Inc.
Elected (Bank) 1983 and Timberline Community Bank
Elected (Bancshares) 1991
9 DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (6) 339,961 direct 33.77%*
and indirect
* percentage includes both direct and indirect beneficial ownership.
(1) Includes 62,366 shares held by the Gareld J. and V. June Collins
Trust, of which Mr. Collins is trustee.
(2) Includes 76,014 shares held by the Norman E. and Mayme E. Fiock
Trust, of which Mr. Fiock is trustee, and 7,102 shares held by Mr.
Fiock's wife.
(3) Includes 1,500 shares held by Don Hilton in trust for Mr. Hilton's
two grandchildren.
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(4) Mr. Day assumed the position of Bank Secretary on June 8, 1988, and
Bancshares Secretary on May 9, 1991.
(5) Mr. Smith was a founding Director of Timberline Community Bank and
retired in January, 1981. He was reappointed to the Board of Directors
of the Bank in October, 1982.
(6) Includes the 7 directors and Executive Officer listed in the chart
along with two other Executive Officers.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THESE
NOMINEES
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the remuneration earned in 1997 by each
Executive Officer of Bancshares and the Bank whose total remuneration
exceeded $60,000, and by all Executive Officers of Bancshares and the Bank
as a group.
CASH AND CASH EQUIVALENT FORMS OF REMUNERATION
<TABLE> <C> <C> <C> <C>
SALARIES, FEES SECURITIES OR PROPERTY AGGREGATE OF
NAME OF INDIVIDUAL DIRECTORS FEES INSURANCE, BENEFITS CONTINGENT
OR NUMBER OF CAPACITIES IN COMMISSIONS OR REIMBURSEMENTS, FORMS OF
PERSONS IN GROUP WHICH SERVED AND BONUSES PERSONAL BENEFITS REMUNERATION
Robert J Youngs President & $ 159,000 (1) $0
Chief Executive
of Bank &
Bancshares
Roger B. Ebert Senior Vice $ 75,200
President & Loan
Administrator,
Bank
Helen L. Gaulden Senior Vice $ 61,400
President,
Cashier &
Treasurer of
Bank & Bancshares
Executive Officers Officers $ 295,600
as a group
NOTES: (1) the Bank has paid and plans to continue to pay premiums on certain life
insurance policy coverage for Bancshares and Bank Executive Officers in excess of
that normally provided Bank employees. It is the opinion of Bancshares' Board of
Directors that the total personal benefit paid to any Executive Officer of Bancshares
or the Bank during the year was leass that $5,000.
</TABLE>
COMPENSATION PURSUANT TO PLANS
The Bank initiated, in the first quarter of 1994, a Salary Continuation
Plan for its three executive officers. A Salary Continuation Plan (SCP) is
a non-qualified, executive benefit plan in which the bank agrees to pay the
executive additional benefits in the future, usually at retirement.
Because the SCP is a non-qualified plan, the bank can selectively reward
certain key executives without regard to the non-discrimination
requirements of qualified plans.
The SCP is embodied in a written agreement between the bank and the
executive(s) selected to participate in
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the Plan. The SCP is an unfunded plan, which means that the executive has
no rights under the agreement beyond those of a general creditor of the
bank, and there are no specific assets set aside by the bank in connection
with the establishment of the Plan. The accounting rules concerning the
Plan require that the bank accrue sufficient expenses so that the present
value of the benefits to be paid to the executive at retirement is
reflected as a liability on the bank's books by the time of retirement.
The SCP typically provides that, if the covered executive dies prior to or
during retirement, the bank will pay the benefits set forth in the
agreement to the deceased executive's beneficiary or estate.
The Plan is informally linked with a single premium universal life
insurance policy, which is purchased by the bank in connection with its
implementation. The executive is the insured under the policy, but the
bank is the owner and the beneficiary of the policy. The executive has no
claim on the insurance policy, its cash value or the proceeds thereof. The
cash surrender value of the single premium insurance policy(ies) is carried
on the bank's books in "other assets" consistent with generally accepted
accounting principles.
During the pre-retirement period, there are no tax consequences to the
covered executive with respect to the Plan agreement and there are no tax
deductions to the bank in connection with the Plan. The cash value of the
insurance policy increases through interest credited by the insurance
company. The increase in the insurance cash value is not taxable income.
After retirement, the benefit payments to the executive are taxable income
and are tax-deductible expenses to the bank as they are paid. If the
executive were to die, either prior to or during retirement, the bank will
receive the insurance proceeds from the policy tax free, except for
possible alternative minimum taxes, and the payments made by the bank to
the executive's beneficiary will be tax-deductible expenses to the bank.
Since the present value of the bank's obligation to the executive has been
booked as of the retirement date, the impact on the bank's income statement
after retirement is minimal.
The Plan was established as follows:
ANNUAL DURATION
RETIREMENT RETIREMENT OF RETIREMENT
NAME AGE BENEFIT BENEFIT
Robert J. Youngs, 65 $48,000.00 10 Years
President & CEO
Roger B. Ebert 65 $24,000.00 10 Years
Sr. Vice President &
Loan Administrator
Helen L. Gaulden 65 $20,000.00 10 Years
Sr. Vice President &
Cashier
Payment schedules will be selected by the covered employees at retirement.
No amounts have been paid or distributed under the plan during the last
fiscal year. Amounts in the plan have not been included in the previous
cash compensation table.
Amounts accrued pursuant to the plan for the accounts of the named
individuals and group during the last fiscal year are as follows:
Robert J. Youngs $68,439.
Roger B. Ebert 61,975.
Helen L. Gaulden 9,451.
Total as a Group $139,865.
In the first quarter of 1994, the Bank initiated a 401(K) plan in which all
employees can participate. The 401(K) is a qualified plan. Employees may
elect to deposit up to 15% of gross wages in the plan and the Bank
contributes an additional 10% of the employees' election.
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The Bank maintained an Incentive and Nonqualified Stock Option Plan
("Plan") which was originally adopted by the Board of Directors of the Bank
on March 9, 1989, and which was duly approved by shareholders of the Bank on
June 9, 1989. The Plan, by resolution of the Board of Directors on March 12,
1998 was terminated.
As of December 31, 1997 there were no outstanding options granted under the
plan. The following table provides certain information concerning options
granted under the Plan to Bancshares and Bank Executive Officers and
directors.
EXECUTIVE OFFICER AND DIRECTOR STOCK OPTION INFORMATION
ALL EXECUTIVE
OFFICERS AND
NON-EMPLOYEE
ROBERT J. ROGER B. HELEN L. NON-EMPLOYEE DIRETORS AS
YOUNGS EBERT GAULDEN DIRECTORS A GROUP (1)
Granted:
Jan. to Dec. 31 1997
Number of Shares 0 0 0 0 0
Average per share
exercise price $NA $NA $NA $NA $NA
Exercised:
Jan. to Dec. 31 1997
Net Value realized
in shares (market
value less any 44,700 0 0 4,614 49,314
exercise price) $523,212 $NA $NA $53,638 $575,495
(2)
Options outstanding
at Dec. 31, 1997
Number of Shares 0 0 0 0 0
Average per share
exercise price $NA $NA $NA $NA $NA
Potential
(unrealized) value
in shares $NA $NA $NA $NA $NA
(Market value less
exercise price)(3)
(1) Includes one Executive Officer and one Director of Bancshares and the Bank,
a total of 2 persons.
(2) Market Value is as of date the Options were exercised.
(3) Common Stock of Bancshares is listed on NASDAQ as TBLC. Market Value, as
December 31, 1997 is estimated to be $15.13 per share, based on Bancshares
management's knowledge of a limited number of trades of Bank Common Stock.
The $15.13 Market Value represents the average high and low sales price of
known transactions during December, 1997.
TRANSACTIONS AND RELATIONSHIPS WITH MANAGEMENT
The Company has had in the past, and expects to have in the future, banking
transactions in the ordinary course of business with directors and
Executive Officers on substantially the same terms, including interest
rates and collateral on loans, as those prevailing at the same time for
comparable transactions with other persons; and, in the opinion of
management, these transactions do not and will not involve more than the
normal risk of collectibility or present other unfavorable features.
Extensions of credit outstanding, both direct and indirect, to Bancshares
and Bank directors, their associates and Executive Officers totaled
$270,000 at December 31, 1997. The highest amount of loans to such
directors, their associates and Executive Officers at any one time during
the year was $319,000 which represented 4.27% of the Bank's equity capital.
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ADOPTION OF THE TIMBERLINE BANCSHARES, INC.
1998 STOCK OPTION PLAN
(PROPOSAL 2)
Introduction
On February 12, 1998, the Timberline Bancshares, Inc. 1998 Stock Option
Plan (the "Plan") was adopted by the Board of Directors of Timberline
Bancshares, Inc. (the "Company") subject to approval by the Company's
shareholders. The Plan provides for the granting of options to purchase
shares of Company Common Stock ("Common Stock") at option prices per share
which must not be less than one hundred percent (100%) of the fair market
value per share of Common Stock at the time each option is granted. It is
intended that options granted pursuant to the Plan qualify for treatment
either as "incentive stock options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended ("Code"), or as "nonqualified
stock options," as shall be determined and designated upon the grant of
each option. The Plan provides that 300,000 shares of the Company's
authorized but unissued Common Stock will be available for issuance under
the Plan. The summary below is subject to the provisions of the Plan, a
copy of which is attached to this Proxy Statement as Exhibit A.
The Company currently has no stock option plan and is unable to make any
stock option grants to its officers, directors and management level
employees. The Board of Directors believes it is advisable for the
shareholders to adopt the Plan in order to have options available as an
additional means of retaining and attracting competent officers, directors
and management level employees for the Company and its subsidiaries, and
for inducing high levels of performance and efforts for the benefit of the
Company and its shareholders.
Summary of the Plan
The Plan will be administered by the Board of Directors. All options under
the Plan will be granted at an exercise price of not less than 100 percent
of the fair market value of the shares of Common Stock on the date of
grant, except for an incentive stock option granted to an optionee who at
the time of the grant owns more than 10% of the total combined voting power
of all classes of stock of the Company or a subsidiary of the Company in
which case the option price shall not be less than 110% of the fair market
value of such stock. The purchase price of any shares purchased upon
exercise is payable in full in cash or, subject to applicable law, with
Common Stock previously acquired by the optionee and held by the optionee
for a period of at least six months. The equivalent dollar value of shares
used to effect a purchase shall be the fair market value of the Common
Stock on the date of exercise.
Options granted pursuant to the Plan shall be for a term of up to ten (10)
years, except for certain incentive stock options described below. Each
option shall be exercisable in installments and upon such conditions as the
Board of Directors shall determine. Options granted shall vest over a
period no greater than five years, and no less than 20% of such option
shall vest annually. Optionees shall have the right to exercise all or a
portion of the option at any time or from time to time with respect to the
vested part of their stock options. If any option shall
expire without being exercised in full, the shares will again become
available for granting of stock options under the Plan. The Plan shall
expire on February 12, 2008.
Incentive stock options may be granted to full-time salaried officers and
management level employees of the Company or a subsidiary. No director who
is not also a full-time salaried officer or management level employee may
be granted an incentive stock option pursuant to the Plan. No incentive
stock option with a term of more than five (5) years may be granted to any
person who at the time of grant owns stock possessing more than 10% of the
total combined voting power or value of all classes of stock of the Company
or a subsidiary of the Company. Nonqualified stock options may be granted
to directors, full-time salaried officers and management level employees of
the Company or its subsidiaries.
Tax Consequences to the Optionee
The following describes, generally, the major federal income tax
consequences relating to stock options issued under the Plan. If all of
the requirements of the Plan are met, generally no taxable income will
result to an
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optionee upon the grant of an incentive or nonqualified stock option.
Incentive Stock Options. If the optionee is employed by the Company (or a
subsidiary) continuously from the date of grant until at least three months
before the option is exercised and otherwise satisfies the requirements of
the Plan and applicable law, the optionee will not recognize taxable income
upon the exercise of the option. If the optionee is not employed by the
Company (or a subsidiary) continuously from the date of grant until at
least three months before the option is exercised for reason other than
death or disability, the optionee will recognize ordinary income at the
time the option is exercised. The Company will be allowed a deduction for
federal income tax purposes only if and to the extent that the optionee
recognizes ordinary income. Upon exercise of an incentive stock option,
the excess of the fair market value of the shares received over the option
price at the time of exercise is treated as an item of tax preference which
may result in the imposition of the alternative minimum tax.
On a subsequent sale of shares acquired by the exercise of an incentive
stock option, gain or loss will be recognized in an amount equal to the
difference between the amount realized on the sale and the optionee's tax
basis of the shares sold. If a disposition (generally a sale, exchange,
gift or similar lifetime transfer of legal title) of stock received
pursuant to an incentive stock option does not take place until more than
two years after the grant of such option and more than one year after the
exercise of such option, any gain or loss realized on such disposition will
be treated as long-term capital gain or loss. Under such circumstances,
the Company will not be entitled to a deduction for income tax purposes in
connection with the exercise of the option.
If a disposition of stock received pursuant to an exercise of an incentive
stock option occurs within two years after the grant of such option or one
year after the exercise of such option, the optionee must treat any gain
realized as ordinary income to the extent of the lesser of (i) the fair
market value of such stock as of the date of exercise less the option
price, or (ii) the amount realized on disposition of the stock less the
option price. Such ordinary income realized is deductible by the Company
for federal income tax purposes. Any additional amount realized on the
disposition will be taxable as either long-term or short-term capital gain,
depending on the holding period.
Nonqualified Stock Options. In general, when an optionee exercises a
nonqualified stock option, the optionee recognizes ordinary income in the
amount of the excess of the fair market value of the shares received upon
exercise over the aggregate amount paid for those shares, and the Company
may deduct as an expense the amount of income so recognized by the
optionee. For capital gains purposes, the holding period of the shares
begins upon the exercise of the option, and the optionee's basis in the
shares is equal to the fair market value of the shares on the date of
exercise.
If, upon exercise of a nonqualified option, the optionee pays all or part
of the purchase price by delivering to the Company shares of already-owned
stock, there are no federal income tax conse-quences to the optionee or the
Company to the extent of the number of shares so delivered. As to any
additional shares issued, the optionee recognizes ordinary income equal to
the aggregate fair market value of the additional shares received, less any
cash paid to the Company, and the Company is allowed to deduct as an
expense the amount of such income.
For purposes of calculating tax upon disposition of the shares acquired,
the holding period and basis of the new shares, to the extent of the number
of old shares delivered, is the same as for those old shares. The holding
period for the additional shares begins on the date the option is
exercised, and the basis in those additional shares is equal to the taxable
income recognized by the optionee, plus the amount of any cash paid to the
Company.
Upon a subsequent disposition of the shares received on exercise, the
difference between the amount realized on such disposition and the fair
market value of the shares on the date of exercise generally will be
treated as a separate capital gain or loss.
Excise Tax. In addition, the exercise of outstanding options that become
exercisable upon certain major corporate events may result in all or a
portion of the difference between the fair market value of the option
shares and the exercise price of any shares issuable in respect to such
options being characterized "parachute payments." A 20% excise tax is
imposed on the optionee on any amount so characterized and the Company will
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be denied any tax deduction for such amount.
Withholding Taxes. The Company is generally required to withhold
applicable payroll taxes with respect to compensation income recognized by
optionees. The Company is also generally required to make certain
information reports to the Internal Revenue Service with respect to any
income of an optionee attributable to transactions involving the grant or
exercise of options and/or the disposition of shares acquired on exercise
of options.
Other Terms and Conditions
Options under the Plan shall not be transferable by the optionee during the
optionee's lifetime. In the event of termination of employment or
cessation as a director as a result of the optionee's death or disability,
to the extent exercisable on the date employment or directorship
terminates, the option shall remain exercisable for up to one (1) year (but
not beyond the end of the original option term) by the disabled optionee
or, in the event of death of the optionee, by the person or persons to whom
rights under the option shall have passed by will or the laws of descent
and distribution. In addition, if an optionee dies during the three month
period referred to below, the option shall expire one year after the date
of such death or the date the option expires whichever is earlier.
If an optionee's employment is terminated, unless termination was for cause
or if an optionee's directorship is terminated, the optionee shall have the
right, for a three-month period after such termination, to exercise that
portion of the option which was exercisable immediately prior to such
termination. If an optionee's employment is terminated for cause (which
shall include malfeasance or gross misfeasance in the performance of duties
or conviction of a crime involving moral turpitude), the option shall
expire within 30 days of the date of termination. However, in no event may
the option be exercised after the end of the original option term.
In the event of certain changes in the outstanding Common Stock, such as
stock dividends, stock splits, recapitalization, reclassification,
reorganization, merger, stock consolidation or otherwise, appropriate and
proportionate adjustments shall be made in the number, kind and exercise
price of shares covered by any unexercised options or portions thereof. In
the event of a liquidation of the Company or upon a reorganization, merger
or consolidation of the Company with one or more corporations, the result
of which the Company is not the surviving corporation or the Company
becomes a subsidiary of another corporation, a sale of substantially all of
the assets of the Company to another corporation, or upon a sale
representing more than 80% of equity securities voting power of the Company
to any person or entity (any one of which shall be referred to as a
"Terminating Event"), the Plan shall terminate and all options theretofore
granted shall completely vest and become immediately exercisable. All
outstanding options not exercised by the time of the Terminating Event
shall at such time terminate. However, any options not exercised at the
time of a Terminating Event shall not terminate if they have been assumed
or substituted by the successor corporation.
The Board of Directors reserves the right to suspend, amend or terminate
the Plan, and, with the consent of the optionee, make such modifications of
the terms and conditions of his/her option as it deems advisable, except
that the Board of Directors may not, without further approval of a majority
of the shareholders, increase the
maximum number of shares covered by the Plan, change the minimum option
price, increase the maximum term of options under the Plan or permit
options to be granted to anyone other than a director, officer or
management level employee.
No option granted pursuant to the Plan shall be exercisable until all
necessary regulatory and shareholder approvals are obtained. No grants
under the Plan have been made; however, it is anticipated that options may
be granted to directors and executive officers of the Company in the near
future.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" ADOPTION OF THE
TIMBERLINE BANCSHARES, INC. 1998 STOCK OPTION PLAN
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RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTS
(PROPOSAL 3)
The Board of Directors of Bancshares has selected the Firm of Carlson,
Pavlik and Drageset, Yreka, California as the Company's independent
Certified Public Accountants to examine the financial statements of
Bancshares and the Bank for the year ended December 31, 1998. The firm is
to report on the Company's consolidated balance sheets and related
consolidated statements of income, consolidated statements of cash flow,
and consolidated changes in shareholder's equity and to perform such other
appropriate accounting services as may be required by the Board of
Directors.
Carlson, Pavlik and Drageset has advised the Company that neither the
accounting firm nor any of its members or associates has any direct
financial interest in or any connection with Bancshares or the Bank other
than as independent public auditors. It is not expected that
representatives of Carlson, Pavlik and Drageset will be present at the
Annual Meeting of Shareholders.
The fee arrangement between Carlson, Pavlik and Drageset and the Company is
based on rates and terms customary in their practice.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE FIRM OF CARLSON, PAVLIK AND
DRAGESET BE RATIFIED AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS FOR THE YEAR ENDED DECEMBER 31, 1998.
PROPOSALS OF SHAREHOLDERS
From time to time, individual shareholders may wish to submit proposals
which they believe should be voted upon by the shareholders. The
Securities and Exchange Commission has adopted regulations which govern the
inclusion of such proposals in Bancshares' annual proxy materials. No such
proposals were submitted for the 1998 Annual Meeting. Shareholder
proposals intended to be presented at the 1999 Annual Meeting of
Shareholders must be received by Bancshares at its executive offices not
later than January 11, 1999 (which is 120 days prior to the expected date
of next year's Annual Meeting of Shareholders) in order to be eligible for
inclusion in Bancshares' Proxy Ballot and Proxy Statement for that annual
meeting.
Shareholders may also nominate candidates for director, provided that such
nominations are made in writing and received by Bancshares at its executive
offices not prior to March 12, 1999 nor later than April 23, 1999 (which is
60 and 21 days respectively, prior to the expected date of next year's
Annual Meeting of Shareholders). In accordance with Article 3, Section 16
of Bancshares' Bylaws, nominations for election of members of the Board of
Directors must meet certain requirements. Nomination may be made by the
Board of Directors or by any shareholder of any outstanding class of
capital stock of Bancshares entitled to vote for the election of directors.
Notice of intention to make any nominations shall be made in writing and
shall be delivered or mailed to the President of Bancshares not less than
21 days nor more than 60 days prior to any meeting of shareholders called
for the election of directors. Such notification shall contain the
following information to the extent known to the notifying shareholder; (a)
the name and address of each proposed nominee, (b) the principal occupation
of each proposed nominee, (c) the number of shares of capital stock of
Bancshares owned by each proposed nominee, (d) the name and residence
address of the notifying shareholder, and (e) the number of shares of
capital stock of Bancshares owned by the notifying shareholder.
Nominations not made in accordance with these provisions may, in the
discretion of the chairman of the meeting, be disregarded and upon the
chairman's instructions, the inspectors of the election can disregard all
votes cast for each such nominee.
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ACTION WITH REGARD TO REPORTS
Action taken at the 1998 Annual Meeting to approve the minutes of the last
Annual Meeting does not constitute
approval or disapproval of any of the matters referred to in such minutes.
OTHER BUSINESS
Management of Bancshares knows of no other business to be presented at the
Annual Meeting. If other matters should properly come before the Annual
Meeting or any adjournment thereof, a vote may be cast pursuant to the
accompanying Proxy in accordance with the judgement of the person or
persons voting the same.
By Order of the Board of Directors
Richard S. Day
Secretary
Yreka, California
Dated: April 10, 1998
